mefistofeles wrote:What happened is very simple. The US consumer simply borrowed too much and finds himself unable to pay back all the money he owes.
In the process he has destroyed the world's financial system.
phaster wrote:Just wondering how do you explain what's happening in the economy?
bratticus wrote:phaster wrote:Just wondering how do you explain what's happening in the economy?
Short version of my answer: http://dieoff.org/m1.html
HISTORY OF CAPITALISM
The origins of capitalism: 13th - 16th century AD
... The essential characteristics of capitalism only become evident with an increase in scale - in two quite separate contexts. One is the formation of joint-stock companies, in which investors pool their resources for a major commercial undertaking. The other, not evident until the Industrial Revolution, is the development of factories in which large numbers of workers are employed in a single private enterprise. ...
perdition79 wrote:That was a great primer.
Micki wrote:Free market idiots didn't see this coming because we don't have a free market. US for instance hasn't had a free market for decades.
mefistofeles wrote:What happened is very simple. The US consumer simply borrowed too much and finds himself unable to pay back all the money he owes.
TreeFarmer wrote:Once firmly on the debt train the US consumer's evergrowing debt load powered the world economic expansion. That debt load is no longer growing so the US and world economy is no longer growing.
BlueGhostNo2 wrote:this debt problem does not actually put the USA in a big hole.
kuidaskassikaeb wrote:The credit default swaps CDSs mentioned in the Phaster’s post are just a small part of an enormous shadow banking system, which collapsed. ... One of the things that bugged me about the post was the use of the word "fractional reserve banking," ... I also disagree with the constant moralizing about debt.
The credit default swaps CDSs mentioned in the Phaster’s post are just a small part of an enormous shadow banking system, which collapsed.
phaster wrote in replyFYI the money spent on bail outs is still pretty small in the grand scheme of things IMHO because to put things into perspective size perspective, consider the following ball park figures:
800 billion, first obama bail out bill
2+ trillion cost of various bush economic stimilious
14 trillion estimated annual GDP of the USA
30 to 60 trillion estimated value of credit default swaps
phaster wrote:Just wondering how do you explain what's happening in the economy?
kuidaskassikaeb wrote:Kuidaskassikaeb wroteThe credit default swaps CDSs mentioned in the Phaster’s post are just a small part of an enormous shadow banking system, which collapsed.
phaster wrote in replyFYI the money spent on bail outs is still pretty small in the grand scheme of things IMHO because to put things into perspective size perspective, consider the following ball park figures:
800 billion, first obama bail out bill
2+ trillion cost of various bush economic stimilious
14 trillion estimated annual GDP of the USA
30 to 60 trillion estimated value of credit default swaps
Um yeah so we agree. That was kind of my point. Credit default swaps were basically mortage insurance and they grew to 5X the regular economy, and now that market doesn't exist. I would really like to blame the average american, but seriously this stuff is much bigger. The housing bubble was part of it, but as Krugman pointed out the homeowners of America have lost something like 5 trillion dollars, and the investor class something like 1 trillion. But the hedge funds are dead. You can't bail them out because they are so leveraged that a 5% loss, and well, they're gone too.
kuidaskassikaeb wrote:Krugman and your self are obviously on the same page at least economically. I looked back at the book, and although there are a lot of different acronyms the size of the insurance market was mentioned. Some of the difference is due to the fact that this is a reissue of a book written in 1999 and updated. There is obviously a certain amount of “I told you so” in it and the details have changed.
Where the book surprised me is that it seems that our entire financial crisis can be explained by fractures in the economic system. We all have our unified field theories of collapse, which go something like over-population leads to peak oil and over-shoot. But I really thought that the economic system was well understood, at least within its own terms. The interesting problems in economics were all externalities, that economics really can’t deal with. Things like peak oil and environmental disaster. But while we were all waiting for that to happen, the economy collapsed on its own. When reading the book I got the sense that he was really relieved that economics had something to contribute.
The reason I don't follow any one school of economics, weather its the chicago school of economics, the supply side school, the austrian school, the keynes school, etc., is because I realized long ago when I started gaining an interest in the subject, that each economic philosophy was based on a small data set. Unlike a hard science such as physics, where one can look at multiple events and write out an equation describing an event.
Users browsing this forum: No registered users and 31 guests