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What happened to all of the doom and gloom economic threads?

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More Grecian Sputtering, or why the Obama "BOOM" is to be short-lived...

;) ;)

The problems of the eurozone are ultimately malinvestments. In Greece these days the struggle continues about who will ultimately foot the bill for these investments. During the early 2000s an expansionary monetary policy lowered interest rates artificially. Entrepreneurs financed investment projects that only looked profitable due to the low interest rates but were not sustained by real savings. Housing bubbles and consumption booms developed in the periphery.

In 2007 the bubbles began to burst. Housing prices started to stagnate and even to fall. Homeowners and builders started to default on their loans. As banks had financed and invested into these malinvestments, they suffered losses. After the collapse of the investment bank Lehman Brothers interbank lending collapsed and governments intervened. They bailed out banks and, thereby, assumed the losses of the banking system resulting from the malinvestments.

As malinvestments were socialized, public debts soared in the eurozone. Furthermore, tax revenues collapsed due to the crisis. At the same time, governments started to subsidize industrial sectors and unemployment.

Moreover, even before the crisis, governments had accumulated malinvestments due to their excessive welfare spending. Two causes had incentivized social spending in the periphery. The first cause is low interest rates. These low interest rates were caused by an expansionary monetary policy by the European Central Bank (ECB) and the single currency in itself. The euro came with an implicit bailout guarantee. Market participants expected stronger governments to bail out weaker ones in order to save the political project of the euro if worse came to worst. The interest rates that the Italian, Spanish, Portuguese, and Greek governments had to pay came down drastically when these countries were admitted into the euro. The low interest rates gave these countries leeway for deficit spending.

The second cause is that the euro is a tragedy of the commons, as I explain in my book The Tragedy of the Euro.

In the eurozone, several independent governments can use one central banking system to finance their deficits. The costs of these deficits can be partially externalized in the form of higher prices on foreigners. Take the following example: The Greek government spends more than it receives in taxes. For the difference, the Greek government prints bonds. The banking system buys these bonds because banks can use them as collateral for new loans from the ECB. When the banks pledge the Greek government bonds as collateral with the ECB, they receive new central-bank money. Banks can then use these new reserves to expand credit. The money supply increases, and prices rise. The deficit is thereby indirectly monetized, and the users of the currency pay.

Prices rise not only in Greece but all over the eurozone. In this way a part of the costs of the deficit is externalized to foreigners. Not only the Greek government but all governments can externalize the costs of their deficits in this way, resulting in perverse incentives. If you have higher deficits than other eurozone countries, you can externalize the costs of deficits on other countries. The higher the deficit is in relation to the deficits of the other eurozone members, the better.

There is a monetary redistribution from the fiscally sounder to the unsound governments. These incentives were known from the beginning of the euro. The idea was to restrict these incentives to deficits below 3 percent of GDP via the Stability and Growth Pact (SGP). Yet, the SGP was a total failure. In spite of numerous infringements, no sanction was ever imposed. The main problem is that governments are their own judges. Until now they have always decided that no penalty was necessary.

Today government debts in several eurozone countries are so high that they will never be paid back. Governments are unable or unwilling to do so. If they increase tax rates, their economy will collapse and deficits may actually increase. If they reduce expenditures, there may be social unrest. In either case, they would lose influence and votes. Because these debts will not be paid back, they represent malinvestments.

Malinvestments mean that scarce resources of society have already been squandered; real wealth has been lost by welfare spending and bailing out bubble industries. But it is still not clear who will pay the main burden of the losses caused by unsustainable welfare states and the bailout of industries.
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Philipp Bagus is an associate professor at Universidad Rey Juan Carlos.
http://mises.org/daily/5914/The-Future-of-the-Euro

But, all that probably doesn't affect us.

Right?
 
Malinvestments and bad governance.

I'll give you an example why I think democrat governance is bad for the country. It even has a bit do to with "malinvestments". It is just one small microcosm of what democrat governance is like, but very indicative of the whole.

It was a few years ago that Franklin Raines was appointed as the head of Fannie Mae, the quasi-government institution created to provide home loans. It was a democrat appointment of a democrat operative who was barely (if at all) qualified for his job. I think his most recognized qualification was a willingness to "give back" to his democrat bretheren.

During Raines' years there he managed to increase the pay and bonuses of the chief executive, himself, so that he took $90M out of the organization in his few years there, keep in mind this is a quasi-government agency with no risk of failure (backed by the US government as we saw later). I would call this borderline looting.

While there he also found millions upon millions of dollars to donate to political campaigns, almost all going to democrats. During later years, Barack Obama was the politician who got the most from them for campaign donations.

Raines put into practice horrible political-based policies rather than financially-sound decisions that eventually led the government to have to make good on his promises and it was a major contributing factor to the real estate crash and cost the taxpayer billions upon billions of dollars if not trillions.

So here we have a guy who was probably not really qualified for the job, who looted millions to enrich himself, skimmed millions to help sympathetic politicians (democrats) and drove the organization into the ground where it cost US taxpayers billions of dollars in extra taxes. Millions of people have suffered for his and the democrats' bad decisions/governance in this area and what is the democrat response?

Democrats look at this and say "So, Republicans do it too" (but of course can't point to any examples where that's happened). It doesn't happen.

Democrats can't govern. It's that simple.
 
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Now I have to go to work to pay the taxes that you libs can collect to feed and house yourselves while you post on porn sites all day.
 
RightField said:
Malinvestments and bad governance.

I'll give you an example why I think democrat governance is bad for the country. It even has a bit do to with "malinvestments". It is just one small microcosm of what democrat governance is like, but very indicative of the whole.

It was a few years ago that Franklin Raines was appointed as the head of Fannie Mae, the quasi-government institution created to provide home loans. It was a democrat appointment of a democrat operative who was barely (if at all) qualified for his job. I think his most recognized qualification was a willingness to "give back" to his democrat bretheren.

During Raines' years there he managed to increase the pay and bonuses of the chief executive, himself, so that he took $90M out of the organization in his few years there, keep in mind this is a quasi-government agency with no risk of failure (backed by the US government as we saw later). I would call this borderline looting.

While there he also found millions upon millions of dollars to donate to political campaigns, almost all going to democrats. During later years, Barack Obama was the politician who got the most from them for campaign donations.

Raines put into practice horrible political-based policies rather than financially-sound decisions that eventually led the government to have to make good on his promises and it was a major contributing factor to the real estate crash and cost the taxpayer billions upon billions of dollars if not trillions.

So here we have a guy who was probably not really qualified for the job, who looted millions to enrich himself, skimmed millions to help sympathetic politicians (democrats) and drove the organization into the ground where it cost US taxpayers billions of dollars in extra taxes. Millions of people have suffered for his and the democrats' bad decisions/governance in this area and what is the democrat response?

Democrats look at this and say "So, Republicans do it too" (but of course can't point to any examples where that's happened). It doesn't happen.

Democrats can't govern. It's that simple.
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Damn it, how could this have happened? Why do we let those kind of people try to run things?

He was only a Rhodes scholar with 20+ years experience in financial companies. Totally unqualified for the job, unlike say, Daniel Mudd.
 
vetteman said:
I don't think so dummy, if he did you wouldn't be able to talk.:rolleyes:

Just so you know, you should find something else to jack off to. You couldn't pound a ten penny nail up my ass with a fucking sledgehammer, so forget the fantasy.:rolleyes:
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In Texas everything's bigger so we have to use a sixteen penny
 
vetteman said:
This is for Merc, UD, and the other crowing, starry eyed, Obama sycophants.

<herpa derpa snip>
Click to expand...

Yep, I saw the folks at HotAir.com urging tards like you to push this herpa derp hard today.

Tell you what, REMF buddy, the State of the Union address was 30 days ago and the economic news continues to improve since then.

More and more people are realizing that we're in a real recovery right now. Our long national Dubya nightmare is finally over.

President Obama is going to kick the ass of his Republican opponent in November, and quite honestly there is not a God damned thing you can do about it...except whine.

Whining is what you and your kind do best.
 
RightField said:
I know how it is. An opinion piece from a left wing nut is the gospal truth, but an opinion piece backed up by some pretty smart and interesting factual analysis can be dismissed without the typical liberal giving it an ounce of consideration or thought. :rolleyes:
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Nope, you don't know how it is. That's not what I said or implied in the slightest. What you're doing insisting that what you WANT to believe is true actually is. Logic cop AJ will tell you you're guilty of the fallacy of wishful thinking.

This is also another Straw Man argument... Nothin' telling other people what they think and then attacking them for those thoughts.

How come AJ the logic cop is nowhere to be seen? :confused:


4est_4est_Gump said:
More in-depth, thoughtful rebuttal complete with fact and reason free of fallacies such as ad hominem.


GOoooOOO TEAM!
Click to expand...

Oh wait, here he is posting right after you on this very subject, ignoring your straw man because he happens to politically agree with you.

:cool:
 
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