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109 Comments
- funkedup, on 10/24/2009, -2/+50There's a bit of a difference with Japan. Generally speaking, Japan did not have high consumer debt and was a prudent nation of savers. During the financial market and real estate downturn, Japan was in much better shape to handle the irresponsibility of their government. With the US, it is a much different situation, and not in a good way.
- rizzo2008, on 10/24/2009, -18/+48No what got us into the first place was over the top spending measures like the Stimulus Package, the bank and auto bailouts, etc. If the government had stayed out of the picture altogether in Japan they would have never had a lost decade.
- edstate, on 10/25/2009, -6/+31Pretty much the ONLY thing we're not doing (that the Japanese did is) hiking up the Fed rate too soon. But that's ***** the dollar in the bootrose, so…
Our politicians never want to just let ***** happen. And sometimes, in life and economics, ***** has to work itself out. People need to lose jobs, or not get raises, and house prices need to fall, and banks need to fail. Because politicians simply can't deliver bad news. And the public has gotten used to not hearing bad news. They've gotten used to the Government swooping in and "making everything okay", but it's not. In fact, after so many decades of promises on top of promises on top of programs… it's pretty ***** far from okay.
And to this article's point, the fact that we're not learning from history –even recent, visible history– is simply amazing. - prisoner24601, on 10/25/2009, -11/+34Our government spent 1.4 trillion dollars more than we had available last year. We're up to almost 12 trillion of total debt. We keep piling debt onto our kids without a second thought and without the least concern of what a brutal load they will one day have to deal with.
And in the week since the news came out, digg (a perfect microcosm of what America has on it's mind) has had the front page filled with everything from lolcats to youtube clips, but not even one single article about the news on last year's deficit made it.
ALMOST NO ONE IN AMERICA EVEN REMOTELY CARES ABOUT BEING FISCALLY RESPONSIBLE. We deserve a lost decade. - digggroupie, on 10/25/2009, -2/+24Banks merged together with bail out money.
Now bigger than too big to fail of last year. - MrColdheart, on 10/25/2009, -7/+28Technically didn't the banks risk an economic 'Lost Decade' with toxic assets?
Oh wait this is Bloomberg. - BlacklabelSAR, on 10/26/2009, -1/+16FTA:“We have zero interest rates and still nothing’s happening,” Koo said. Businesses and households don’t want to borrow money even at zero rates; they’re too busy rebuilding savings and paying off debt, he said."
Business and households aren't being offered loans at 0%. Just the banks. And the banks/credit card companies are ramping up their Usury practices even more.
"If the American people ever allow private banks
to control the issue of their money,
first by inflation and then by deflation,
the banks and corporations that will
grow up around them (around the banks),
will deprive the people of their property
until their children will wake up homeless
on the continent their fathers conquered."
Thomas Jefferson - sibos, on 10/26/2009, -0/+15It's already been almost a decade since the economy was good. The bubble burst in 2000/01, and then 9/11 pushed us back further, but we haven't seen real job growth in a long time, let alone wage increases that keep pace with inflation. If we have a second decade of this, we'll be in pretty terrible shape come 2020.
- gn84, on 10/26/2009, -0/+12@niradg
LOL. Hoover was arguably the most interventionist president in history up to that point, and was dead set against allowing prices to fall to free market levels:
http://en.wikipedia.org/wiki/Reconstruction_Financ ...
http://en.wikipedia.org/wiki/Federal_Home_Loan_Ban ...
http://en.wikipedia.org/wiki/Revenue_Act_of_1932
http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_A ...
etc.
http://online.wsj.com/article/SB122576077569495545 ...
http://www.lewrockwell.com/murphy/murphy155.html - buzaman, on 10/26/2009, -0/+12With all the 'we are japan' talk, it's more accurate to say we are Japan without a nation of thrifty savers, and without an export driven economy. Also, Japan doesn't pour a trillion dollars a year funding an empire and a Department of Offense to protect itself from 3rd world nations and fundamentalists podcasting from tora bora.
http://globaleconomicanalysis.blogspot.com/2009/10 ... - govsucks, on 10/26/2009, -1/+13What we need here is move shovel ready projects. Perhaps scooping up ***** in DC.
- phpld, on 10/26/2009, -2/+14Let's not forget the government has been engaged in "corporate socialism" increasingly since the 80's. It is not average Americans that benefited from government programs. It is corporations. Until we break the stranglehold corporations have on America, you can expect more of the same. Healthcare is a start.
In Japan it was also speculation by businesses that led to their lost years. Sure, they could have just let all the businesses crash, but that would have led to massive unemployment. It's not as easy as you might think to just let the government stay out of it when the welfare of millions is at stake.
But once it is fixed, it is SUPER IMPORTANT to go in and break up these big corporations that clearly have monopolistic powers (ex. charge as much as they want for health insurance and drop sick people), and add regulations that prevent speculation that would jeopardize our nation. - SpykerSpeed, on 10/26/2009, -1/+13http://mises.org/story/2902
"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action…. No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times…. For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered…. They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for … "the common run of men and women." Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom…. We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction."
~Herbert Hoover - SpykerSpeed, on 10/26/2009, -2/+12Replace Republic with "Empire", and maybe it's more accurate.
- Mujokan, on 10/26/2009, -0/+10There was a massive debt bubble, but a lot of it was in real estate, where it was pointless. Also stupid financial instruments that were basically playing three-card monte on the street corner.
The very top level had a great time, and expanded, but not a lot of benefit was seen further down the income scale. - TheEngineer2008, on 10/25/2009, -6/+16BTW, this doesn't mean I support any of this. IMO, government should take a big step back and the whatever happens happen.
- TheEngineer2008, on 10/24/2009, -1/+10There seems to be some problem with the link. The article is at http://www.bloomberg.com/apps/news?pid=20602007&am ...
- bigterguy, on 10/26/2009, -0/+9Politicians can't take credit for something if they do nothing. Thus all politicians will do something - even the exact wrong thing - rather than do nothing. That's why a very limited government is best !! The Founders knew this, but we seem to have forgotten the lesson.
- SpykerSpeed, on 10/26/2009, -4/+13They're adept at blaming it on some other *****. Like the opposing political party. And then when we continue to hemorrhage jobs, they claim the stimulus bill "saved" jobs from being lost.
And people will believe them, until they stop teaching this vulgar Keynesian crap in high schools and universities. - niradg, on 10/26/2009, -11/+20that's laughably untrue and incredibly, jaw-droppingly ingorant. You should be ashamed to be so stupid.
"The initial government response to the Great Depression was ineffective, as President Hoover insisted that the economy was sound and that prosperity would soon return. Hoover believed the basic need was to restore public confidence so businesses would begin to invest and expand production, providing jobs and income to restore the economy to health. But business owners saw no reason to increase production while unsold goods clogged their shelves. By 1932 investment had dropped to less than 5 percent of its 1929 level.
Convinced that a balanced federal budget was essential to restoring business confidence, Hoover sought to cut government spending and raise taxes. But in the face of a collapsing economy, this served only to reduce demand further. As conditions worsened, Hoover’s administration eventually provided emergency loans to banks and industry, expanded public works, and helped states offer relief. But it was too little, too late.
The epitome of a “self-made man,” Hoover believed in individualism and self-reliance. As more and more Americans lost jobs and faced hunger, Hoover asserted that “mutual self-help through voluntary giving” was the way to meet people’s needs. Private giving increased greatly, reaching a record high in 1932, but charitable organizations were overwhelmed by the enormous number of people in need. To many, government assistance seemed the only answer, but Hoover was convinced that giving federal relief payments would undermine recipients’ self-reliance, and he resisted this step throughout his term."
http://encarta.msn.com/encyclopedia_761584403/grea ... - erkokite, on 10/26/2009, -1/+10Digg is a microcosm of what America has in mind? Well, ***** me. That explains perfectly why Ron Paul defeated McCain and Obama in the 2008 elections.
- gn84, on 10/26/2009, -1/+9If by economic policies you mean expansion of government and overzealous spending, then yes, Bush's economic policies made things much worse.
But the Federal Reserve's loose monetary policy and suppression of interest rates did as much if not more damage. - funkedup, on 10/26/2009, -1/+9No. The economic expansion was difficult because all of the resources were sucked up by the Japenese government, and the deprivation of the market. High saving and fiscal conservatism are not bad things, despite what Ben Bernanke tells you. Saving's allows for capital investment, which is what grows the economy. Fiscal conservatism is a good thing. Why wouldn't being conservative with money be a good thing? When people aren't borrowing and the rates are low, then there is a good reason for it. Would it have been better if the government forced their citizens to go into debt?
The problems that we face are exemplified in your comment right there. "If only people borrow and spend more, then we will be on the road to recovery!" History and reality show otherwise... - TheEngineer2008, on 10/24/2009, -8/+16That's all true, but it doesn't mean that a nation bloated by deficit spending and flooded with fiat currency won't experience an economic slowdown once the federal government stops dumping all that borrowed money into the economy.
- stonebear, on 10/26/2009, -2/+9Republic implies a nation ruled by law, rather than corporate lobbyists.
- SzaszMan, on 10/26/2009, -1/+8I hate to say it, but Koo and Krugman are idiots. The Japanese have been showering their economies with fiscal "stimulus" and have been bailing out failing banks and other corporations for years with nothing to show for it but zombie banks, staggering deficits, and anemic growth. Is Koo saying Japan failed because they didn't do *enough* deficit spending? Please - the Japanese have the second highest debt-to-GDP ratio in the world (source: http://en.wikipedia.org/wiki/List_of_countries_by_ ... ). Is it possible that the "cure" Koo and Krugman are nattering about is in fact worse than the disease?
The idea that you can borrow yourself rich makes as much sense as dirtying yourself clean, or fighting for peace, or ***** for virginity. Krugman and Koo really should know better. - SpykerSpeed, on 10/26/2009, -13/+20Everyone talks about how we should "Never Forget!" 9/11.
Well here's another lesson the American people should never forget: that when 80 to 90% of Americans were screaming at the top of their lungs and pleading with our representatives in Washington, they sold us out.
We flooded Congress with calls to NOT spend away our future earnings on bailing out massive corrupt corporations. We sent hundreds of thousands of emails and letters begging them... to NOT blow trillions on "stimulus" which would go to paving roads and favored political allies.
And they did it anyway. This is not "America" any more. It's the North American Republic. - niradg, on 10/26/2009, -7/+14agreed, except it wasn't 9/11 that "pushed us back farther," it was the Bush Administration's economic policies.
- kaelyiesta, on 10/26/2009, -1/+8"If" was a very important conditional you used. Unfortunately, most people have so poor an understanding of both history and economics that they don't understand that that's all it is. We didn't have to choose between the two, but through fear mongering and lobbyist effort, our government sure did it's best to make it seem that way when banks were writing up the text of the bills they had congress pass for them.
- JohnGalt750, on 10/26/2009, -0/+7Show me one recession or down cycle that was prevented or largely ameliorated by government spending.
- 2Six119, on 10/26/2009, -1/+8As far as I can tell no one on this page even clicked the link before commenting.
- SQLDigger, on 10/25/2009, -4/+11"I upped the ante, so now I HAVE to go all in."
Spoken like a true failure at both gambling and life. - thecoolestguy, on 10/27/2009, -0/+6Hoover's interventions caused the Great Depression.
FDR's exasperated it.
Hoover's labor policies and the Great Depression:
http://www.eurekalert.org/pub_releases/2009-08/uoc ...
Hoover's pro-labor stance helped cause Great Depression, UCLA economist says
Pro-labor policies pushed by President Herbert Hoover after the stock market crash of 1929 accounted for close to two-thirds of the drop in the nation's gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression, a UCLA economist concludes in a new study.
"These findings suggest that the recession was three times worse — at a minimum — than it would otherwise have been, because of Hoover," said Lee E. Ohanian, a UCLA professor of economics.
The policies, which included both propping up wages and encouraging job-sharing, also accounted for more than two-thirds of the precipitous decline in hours worked in the manufacturing sector, which was much harder hit initially than the agricultural sector, according to Ohanian.
"By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been, and that act drove down the overall gross national product," Ohanian said. "His policy was the single most important event in precipitating the Great Depression."
The findings are slated to appear in the December issue of the peer-reviewed Journal of Economic Theory and were posted today on the website of the National Bureau of Economic Reasearch (www.nber.org) as a working paper.
***
Despite continued calls from industry for wage cuts in 1930 and 1931, Hoover held industry to their original promise, Ohanian found. By late 1931, manufacturers requested that Hoover provide relief in the form of increasing their ability to collude for price-setting purposes. Hoover denied this request. In response, industry signaled they would no longer support the wage freeze.
"In late 1931, industry finally did cut wages, but it was too late," Ohanian said. "By this point, the economy was in an unprecedented, full-blown depression." - BlacklabelSAR, on 10/26/2009, -0/+6"Unfortunately, Obama and the Democrats are not the right people to put brains over heart to save our country."
True, because the banks have bought the government. History shows that this is nothing new. So who are the right people to save our country? - sangjmoon, on 10/26/2009, -0/+6I wish the US voters had the bravery and brains to elect people who are fiscal conservatives into power. The Republicans are only the lesser of two evils as they showed by subsidizing the ethanol industry which led to skyrocking food prices. The best we can hope for is that the Republicans will increase government spending at a lower rate than the Democrats.
- jdames1980, on 10/26/2009, -0/+6This is not something that is avoidable. We would be lucky to have this mild of an economic effect as Japan had. Our entire economy is a complete *****.
- YZBot, on 10/26/2009, -3/+9And to think, we never had to be in the situation in the first place. Thanks a lot you ***** central bankers.
- niradg, on 10/26/2009, -8/+13I'm not entirely sure this is avoidable. If we have to choose between repeating either The Great Depression or Japan's Lost Decade, I'll choose the latter every time.
- sangjmoon, on 10/26/2009, -2/+7If you haven't already noticed, inflation is starting to accelerate at a time when our economy is still in the red. So, our first concerns will be a period of stagflation, just like after Reagan's bout of printing money. However, the scale of money printing now dwarfs anything else in history, so it is unknown how long it will take for real value in the economy to catch up with the money supply. Obama and the Democrats aren't making it easier by pushing programs that just increase the debt and make it far longer before we reach break-even. On top of this, we have the coming economic armageddon as the bulk of the baby-boomers retire and drive Medicare/Medicaid and Social Security through the roof. What we need is a government that thinks more with its brain than its heart because thinking with the heart is what caused the biggest real threats to our country's well being. Even our current economic crisis had its major factor as the government's attempt to give those who don't normally qualify for home loans those loans. Unfortunately, Obama and the Democrats are not the right people to put brains over heart to save our country.
- niradg, on 10/26/2009, -17/+22That's just plain ignorant. If the government hadn't gotten involved- both the Bush and the Obama administrations- the entire US economy would have collapsed. You neo-hooverites need to get an education.
- sibos, on 10/26/2009, -0/+5Well, I think it was both.
I very much disagreed with almost everything Bush did, and I do fault him in part for the terrible state of the country today, but things had plateaued just as he came into office, and 9/11 did have a massive affect on the economy and country. His continued application of failed policy years after either didn't help or did hurt the nation, but if we're going to mark the beginning of this less-than-good economy at somewhere around 2001, that's before his taxes were in place. - ZooMigo, on 10/26/2009, -0/+5As I see our largest problem, we no longer have the means to grow out of the stagnation we are in. There was a time when the US was a net producer of goods and by selling those goods to other nations we were able to bring growth and prosperity. Over the last 60 years or so, the influence of environmental regulation, labor laws and government regulation have driven the cost to manufacture in the US up to a point where it is more profitable for companies to move overseas and import back.
Problem is, the US thought it could turn from a physical product producer and exporter to an idea and information producer and exporter. Which is fine, except that it leads to a huge divide in the economic status of our citizens. At a time when the middle class was largely working in factories and making a decent wage the poorer paying jobs were filled by uneducated, young or inexperience workers who eventually (mostly) moved up to better positions and pay. Now that we lack this middle ground (manufacturing) we have lost most of the steps the poor used to move up. We have, in essence, created our own economic divide by eliminating the route to prosperity.
As a resident of Colorado Springs, I see this in a small scale all around me. During the early 80's with the poor economy, this city tried to increase its manufacturing base, but wanted to do so in an environmentally friendly way, so they went out to attract low pollution corporations. As a result, we largely have an economic base built on religous groups like Focus of the Family, The Navigators, etc. (also a military presence, but that too is largely non-polluting). As a result CS is largely immune to many of the economic swings, no real highs, no major lows, but it has a feel of always being on the edge of collapse. It also is a very divided city, with those working in information type jobs doing well, and those in the service type jobs struggling. There is very little middle ground here and I believe that it shows the way the US will follow until we revisit some of our laws and move back to an economy based on production of goods instead of ideas. - buzaman, on 10/26/2009, -1/+6@Niradg
The same people who told you it would be the end of the world if they didn't pump massive amounts of money into the economy, didn't even now we were in a gigantic asset bubble to begin with and denied the true status of the economy until the bitter end.
http://www.youtube.com/watch?v=HQ79Pt2GNJo
There was a third option but that option is not politically favorable. It's the same solution that was used for 20th century economic downturns that preceded the Great Depression, most notably the terrible depression of 1920-21. - killdashnine, on 10/26/2009, -0/+5If our nation were led by rational people with a clear grasp of Economics, History, and Science, bad things would happen less often.
- ontain, on 10/26/2009, -0/+4think it's time for the banks that are doing well to pitch in. Yeah that's right Goldman and JP Morgan.
- kaelyiesta, on 10/26/2009, -3/+7Failed banks don't and never have created a 10 year depression. A country wide policy to intervene in production of a free market will however.
- mbraynard, on 10/26/2009, -0/+4I think you missed the word 'projection' in your quote.
- dieyoung, on 10/26/2009, -0/+4Or get a libertarian in office =)
- mbraynard, on 10/26/2009, -3/+7The banks made those risks with toxic assets because they had assurances from a government institution that they would buy those assets bundled together as part of an economic policy to help irresponsible people buy houses rather than rent like they should be doing.
- thecoolestguy, on 10/27/2009, -0/+4@2Six119, you're dead wrong.
Hoover was an interventionist. He was the first US president that believed that the federal government was not bound by the Constitution to stay out of economic affairs:
---
"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action…. No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times…. For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered…. They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
---
His interventionist policies created the Great Depression:
---
http://www.eurekalert.org/pub_releases/2009-08/uoc ...
Hoover's pro-labor stance helped cause Great Depression, UCLA economist says
Pro-labor policies pushed by President Herbert Hoover after the stock market crash of 1929 accounted for close to two-thirds of the drop in the nation's gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression, a UCLA economist concludes in a new study.
"These findings suggest that the recession was three times worse — at a minimum — than it would otherwise have been, because of Hoover," said Lee E. Ohanian, a UCLA professor of economics.
The policies, which included both propping up wages and encouraging job-sharing, also accounted for more than two-thirds of the precipitous decline in hours worked in the manufacturing sector, which was much harder hit initially than the agricultural sector, according to Ohanian.
"By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been, and that act drove down the overall gross national product," Ohanian said. "His policy was the single most important event in precipitating the Great Depression."
The findings are slated to appear in the December issue of the peer-reviewed Journal of Economic Theory and were posted today on the website of the National Bureau of Economic Reasearch (www.nber.org) as a working paper.
***
Despite continued calls from industry for wage cuts in 1930 and 1931, Hoover held industry to their original promise, Ohanian found. By late 1931, manufacturers requested that Hoover provide relief in the form of increasing their ability to collude for price-setting purposes. Hoover denied this request. In response, industry signaled they would no longer support the wage freeze.
"In late 1931, industry finally did cut wages, but it was too late," Ohanian said. "By this point, the economy was in an unprecedented, full-blown depression."
---- -
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