If and when do you think this stimulus plan will work?

@hamburger,

Quote:

it seems that buffet assumes that tiffany will not go out of business anytime soon - kind of encourging , isn't it

you take away the wrong lesson.......that Buffet can get the terms that he is getting simply because he has cash and no one else does should scare the hell out of you. Only in a depression does Buffet get these terms. We are in it....that is what this story says.

2 Replies

@hawkeye10,

hawkeye10 wrote:

the resulting social instability will be exactly the same whether the collapse is fast or slow

This demonstrates a very poor understanding of economics. This is simply false, the faster we fall the more we will fall. Slowing it down will bring confidence to the economy and loosen up some spending which will in turn reduce how much we will fall.

There are also a lot of companies (e.g. Google, Microsoft) that are cutting jobs because of the outlook alone, not because of any cash flow problems (both companies I mention have billions in cash). These companies don't need to cut jobs now, but are forecasting the need to react to the scale of the economic problems we have and adapt to our new "reality". This kind of fear-based, as opposed to bottom-line based, layoffs are the direct product of the speed and depths of the financial crisis. They don't want to be caught with their pants down with things moving as fast as they are right now, but have no real business need to be laying off their workers.

Others still are cutting jobs because the jobs being lost are impacting their businesses. As an example, the health care industry is cutting jobs because unemployed people tend to avoid hospitals, with fewer unemployed people they'd cut fewer jobs.

And whenever the bottom of the curve is reached, speculators help drive it upward as that is when they like to time their spending. To say that slowing the speed of the fall will not affect the depths of the fall is just economic ignorance.

1 Reply

@Robert Gentel,

Quote:

And whenever the bottom of the curve is reached, speculators help drive it upward as that is when they like to time their spending. To say that slowing the speed of the fall will not affect the depths of the fall is just economic ignorance

what is ignorant is your assumption that this fall is controlled by technical mechanics, that you can tweak and solve the problem. This crash is caused by the failure of a theory, by theory that was too far removed from the way humans operate, by an economic theory that over rated rationality and poorly understood irrationality. Nothing at all gets fixed until the economic system is remade, as it is impossible to have confidence in a theory and a system that has already failed. At root what we have is a spiritual problem, and we need something credible on which to pin our hopes and dreams. We can't do that until that which is dead is washed away (the old economic order), and we get our minds around the true scope of the problem. Delay and denial are not in our best interests.

1 Reply

@maporsche,

maporsche wrote:

I don't think slowing the fall is desirable.

Then you simply don't understand the nature of the fall. These things are like snowballs, and if anything would cause the complete collapse of our economy it would be an unchecked fall in employment.

Some people are being laid off because other people are being laid off, and slowing the fall is critical to prevent it from deepening the financial crisis. If that's not desirable to you then I have no idea what is. I suspect you have very little familiarity with real unemployment woes (as in national unemployment rates that can bring down governments and put the people in soup lines and in the streets banging pots and pans).

If you really want a better understanding of this, I recommend you research the concepts of Keynesian economics and a good starting point is The General Theory of Employment, Interest, and Money.

2 Replies

@Robert Gentel,

Right....I disagree with you, so it must be because I don't know what I'm talking about.

1 Reply

@hawkeye10,

hawk wrote :

Quote:

you take away the wrong lesson.......that Buffet can get the terms that he is getting simply because he has cash and no one else does should scare the hell out of you. Only in a depression does Buffet get these terms. We are in it....that is what this story says.

i should have put some kind of emoticon into my post .
my assumption is that there will will be a downward trend - perhaps even severely - for another 2-3 years .
but buffet has seldom been wrong i believe . so an 8-10 year timespan to wait for a recovery doesn't seem overly long for him - though he may not live that long .
i suggest that a recovery won't start until consumers are actually "in need of" merchandise . currently there seems to be an overabundance of goods in the stores , (most) consumers have all the goods they need - except those needed for daily living : , food , fuel etc. - and they are "spent out" .
so until such time that consumers really need a new TV , living room , car etc
the market will likely not recover .
this is going to be very painful for many people , but i can't see that we can continue encouraging consumers to buy another TV , video game , car etc just because "you deserve it" as the retailers and banks want (or wanted) us to believe .
it's somewhat like going from "pigging out" to a "starvation diet " - painful but probably unavoidable .
it's like doctors who tell the overweight : "fad diets don't work - you have to change your lifestyle " .
sorry for not being more cheerful .
hbg

0 Replies

@hawkeye10,

hawkeye10 wrote:

what is ignorant is your assumption that this fall is controlled by technical mechanics, that you can tweak and solve the problem.

This is your typical economic bullshit hawkeye. Employment rates can be manipulated and the easiest way to do so is public spending.

Quote:

Nothing at all gets fixed until the economic system is remade, it is impossible to have confidence in a theory and a system that has already failed. At root what we have is a spiritual problem, and we need something credible on which to pin our hopes and dreams.

A spiritual problem? What kind of nonsense are you spouting?

Quote:

We can't do that until that which is dead is washed away (the old economic order), and we get our minds around the true scope of the problem. Delay and denial are not in our best interests.

Ok, now we are in batshit insane territory when you say the solution is the total collapse of the economic order but hey, it plays into your voice crying in the wilderness complex even if it's stupid.

0 Replies

@maporsche,

maporsche wrote:

Right....I disagree with you, so it must be because I don't know what I'm talking about.

No, you can disagree with me and still demonstrate an understanding of the subject. People do that all the time. Keynesian economics has plenty of critics that demonstrate an understanding of the concepts.

However if you say that slowing the rate at which our economy is losing jobs is not desirable it demonstrates a fundamental lack of understanding of the importance of employment in economics. So if you merely objected to the deficit spending as the solution that would be a legitimately arguable economic position, but to say that reducing the unemployment is not desirable is crazy.

Don't take my word for it, you can start with Googling the concept of "full employment" and why unnecessarily high unemployment is often present in a recession and how it can exacerbate the recession.

Unemployment can make this a lot worse than it currently is. If we can't stop the unemployment growth we won't have time to get at the problems that triggered it because unemployment causes more unemployment and deepens a recession.

1 Reply

@hamburger,

hbg, I hate to say this, but Warren Buffett didn't fair so well from the market during the past year. My wife and I did better - performance-wise. I'm not trying to say I'm a smarter investor by any means, but BRK-B was $3,000 many years ago.

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@maporsche,

The painful part is still increasing for hundreds of thousands of people; that's not an option - IMHO.

0 Replies

@Robert Gentel,

Quote:

if you say that slowing the rate at which our economy is losing jobs is not desirable it demonstrates a fundamental lack of understanding of the importance of employment in economics. So if you merely objected to the deficit spending as the solution that would be a legitimately arguable economic position, but to say that reducing the unemployment is not desirable is crazy.

if structural changes need to be made all that lessens the motivation for change is not in our best interests. If it both delays the inevitable change and also costs resources (money) then we pay for our foolishness twice.

1 Reply

@Robert Gentel,

Perhaps an even more persuasive source might be the economics textbooks of Mankiw, or of Bernanke and Frank. Keynes was a controversial figure in his time. Mankiw and Bernanke, on the other hand, are conservative, Republican economists. The economic rationale for the stimulus plan is well accepted among economists, liberal or conservative. (And as an aside, it's painful to see Mankiw saying, in effect: "Don't pay attention to my textbook. Pay attention to what my political friends are saying.")

2 Replies

@hawkeye10,

hawk wrote :

Quote:

you take away the wrong lesson.......that Buffet can get the terms that he is getting simply because he has cash and no one else does should scare the hell out of you. Only in a depression does Buffet get these terms. We are in it....that is what this story says.

i should have put some kind of emoticon into my post .
my assumption is that there will will be a downward trend - perhaps even severely - for another 2-3 years .
but buffet has seldom been wrong i believe . so an 8-10 year timespan to wait for a recovery doesn't seem overly long for him - though he may not live that long .
i suggest that a recovery won't start until consumers are actually "in need of" merchandise . currently there seems to be an overabundance of goods in the stores , (most) consumers have all the goods - except those needed for daily living : , food , fuel etc. - and they are "spent out" .
so until such time that consumers really need a new TV , living room , car etc
the market will likely not recover .
this is going to be very painful for many people , but i can't see that we can continue encouraging consumers to buy another TV , video game , car etc just because "you deserve it" as the retailers and banks want (or wanted) us to believe .
it's somewhat like going from "pigging out" to a "starvation diet " - painful but probably unavoidable .
it's like doctors who tell the overweight : "fad diets don't work - you have to change your lifestyle " .
sorry for not being more cheerful .
hbg

0 Replies

@hawkeye10,

When you talk about "structural change," exactly, what do you mean? Human response to different situations are mostly a "given" in general terms. Most live and learn from the Joneses, and we've seen this evolution since the last depression.

1 Reply

@Thomas,

the professional economists are the ones who rationalized us into this mess.....what makes you think that anyone will take any of them seriously, or should? Your so called experts have been discredited.

1 Reply

@Thomas,

Well Thomas, if I were as well-read in economics as you are I would be able to make such recommendations. But I'm just not as familiar with them as I am with Keynes and have a lot less economic knowledge under my belt to impart so I'll have to keep relying on you to provide more economic wisdom than I am able to (don't stop, I've learned more about economics from research that you prompted through postings here on a2k than from anything else).

1 Reply

That depends on what you mean by your choice of the word "work" in the title.

Will it monetize the debt to some degree? Yes
Will it provide some level of increased liquidity relative to time? Yes
Is it inherently inflationary? Yes
Will it have a net long term positive effect on a structural basis? No

0 Replies

@cicerone imposter,

Quote:

When you talk about "structural change," exactly, what do you mean? Human response to different situations are mostly a "given" in general terms. Most live and learn from the Joneses, and we've seen this evolution since the last depression

as one example: ten years ago it was argued by many that national governments no longer matter, that NGO's, corporations, and states could do most everything that national governments used to do, and better. Now national governments are the only power on the block. in just a few years all has been changed.

What I am talking about is changing how societies are ordered, the nature of the transactions, and our self awareness of who we are. All of this is in play now, and it is impossible to know how it will turn out. Until we do market economics can not work, the system demands predictability and rationality, both are in short supply.

1 Reply

@hawkeye10,

Exactly. Find me some economists who were able to acurately predict the housing bubble back in 2005/6 and let me know what they are saying now. You can start with Peter Schiff.

1 Reply

@hawkeye10,

I'm not sure where you would begin; we still must retain capitalism as our primary economic system. That most of the developed countries now require the government to infuse cash into their system is a necessary component for capitalism to survive.

Do you have a better plan?

1 Reply

If and when do you think this stimulus plan will work?

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