Author Topic: So long AIG, and thanks for $22.7b in profits from the bailout  (Read 5546 times)

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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #105 on: December 14, 2012, 03:18:48 PM »

Offline Interceptor

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We know it failed two ways:

1. Against the promises of those who drove TARP, stimulus, son of stimulus, and all the Fed money.

2. The actual marco-economic conditions (worst recession / slowest recovery). Verus the cost.
This is no kind of proof that we "know" that it failed.

1) What promises are you talking about? I hope that this isn't referring to the chart that Cristy Romer whipped up at the last minute based on inadequate data.

2) You can't compare the current conditions to the costs, without considering the alternative scenario. If we were looking at another Great Depression, for instance, this result is a deal at twice the price. Unemployment stopped at a peak of 10%.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #106 on: December 14, 2012, 03:32:36 PM »

Offline Cman

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We know it failed two ways:

1. Against the promises of those who drove TARP, stimulus, son of stimulus, and all the Fed money.

2. The actual marco-economic conditions (worst recession / slowest recovery). Verus the cost.

On #2, you need to justify that a little bit more rather than making a blanket statement.

For example, consider the following:
The US and the UK were hit by financial crises.
The US responded with stimulus measures, for the most part, whereas the UK responded with austerity measures, for the most part.
Care to guess which country is doing better?
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #107 on: December 14, 2012, 04:31:03 PM »

Offline Brendan

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Well things kept getting worse and the recovery is worse than any other recession. I'm going to leave it to you to show things would have been worse. I don't expect you to do it, but find some strong analysis that does. Short of that, you won't convince me.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #108 on: December 14, 2012, 04:43:36 PM »

Offline nickagneta

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I love the line "the recovery is the worst ever after a recession".

Yeah, well this is the worst recession the country has ever seen and the only thing worse was the Great Depression that took a world war to get out of a decade later.
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #109 on: December 14, 2012, 05:27:18 PM »

Offline Cman

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Well things kept getting worse and the recovery is worse than any other recession. I'm going to leave it to you to show things would have been worse. I don't expect you to do it, but find some strong analysis that does. Short of that, you won't convince me.

Things are actually getting better, and the recovery is going okay, given the size and type of the recession (financial based).
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #110 on: December 14, 2012, 05:30:00 PM »

Offline Interceptor

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Well things kept getting worse and the recovery is worse than any other recession.
It was the worst crisis that we've had since the Depression, is it any wonder that the recovery is the same? There are no V-shaped recoveries after a financial crisis. This isn't like the 1980's, for example, where the Fed decided that it was done beating everyone up, lowered rates, and the economy took off. There is a huge debt overhang, and people are slowly working their way through it, but it takes time.

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I'm going to leave it to you to show things would have been worse. I don't expect you to do it, but find some strong analysis that does. Short of that, you won't convince me.
I've done my part. We have a model for this already: the Great Depression. We know what mistakes were made, and thanks to not repeating (most) of them, things aren't as bad as they could have been. We're fortunate as a country to have a guy like Ben Bernanke, a student of the Depression, in the Federal Reserve.

I don't accept that I have to convince you here. I've laid out the case, I've challenged your statements. If you don't care to respond to them, that's fine, but that's all that I can do.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #111 on: December 15, 2012, 03:29:01 PM »

Offline Brendan

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We do have a model for the great depression. The Great Depression that got worse as gov't did more, stared to bounce back in 36, only to have FDR get reelected expand gov't involvement and a double dip.

Just saying its the worse recession or its a financial recession is meaningless. We have no analysis in this thread showing the gov't intervention made things better. I've shared some articles showing how it made things worse, to which you responded "well as Dave Axlerod says blah blah blah." Completely useless rhetoric.

Can you support your hypothesis about financial recessions?


Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #112 on: December 16, 2012, 01:48:58 AM »

Offline foulweatherfan

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We do have a model for the great depression. The Great Depression that got worse as gov't did more, stared to bounce back in 36, only to have FDR get reelected expand gov't involvement and a double dip.

So, this is kind of a tangent, but I've seen this bit of revisionism several times and have never gotten a straight explanation for it.  I'm not an economist, but here's what I see when I look at the Depression era:








This is private sector GDP rate, unemployment, and government spending, respectively.

So, government spending increased dramatically during FDR's 1st term, and correlated strongly with a major recovery in GDP and unemployment.  Then, after re-election, gov't spending dropped ~20% (and balanced the budget), and these cuts were essentially concurrent with the double-dip.  In late 1938 spending was again increased, and GDP and unemployment again improved.  Then we got involved in WWII which is of course a different animal.

I understand why conservatives dislike FDR philosophically, but I don't see any way to rationally argue that the Depression didn't improve, let alone got worse, during his 1st term.  I can maybe see a regulatory-type argument for the 1937 double-dip, but it's hard to argue any bigger short-term change than the austerity measures.  Can you please break these arguments down for me?

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #113 on: December 17, 2012, 09:47:41 AM »

Offline Brendan

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No I cannot - scope is beyond this forum. But in October of 1936 FDR said: "I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master."

His rhetoric was matched by his policies across the board. Additionally some of the policies enacted in his first term (social security) didn't take effect until his second term. Feel free to explore the parallels with Obamacare.

This article explores what caused the 1937 double dip nicely: http://www.economics21.org/commentary/response-paul-krugman%E2%80%99s-depiction-1937

That being said poorly (or accidentally) implemented policies that had the effect of tightening the money supply artificially do have some of the blame.

I think there is also a lesson on the cyclical nature and bounce back nature of recessions - even monetary ones - in your charts. Things were recovering nicely by FDRs mid term elections in term 1.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #114 on: December 19, 2012, 02:43:20 PM »

Offline Interceptor

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We do have a model for the great depression. The Great Depression that got worse as gov't did more, stared to bounce back in 36, only to have FDR get reelected expand gov't involvement and a double dip.
There is no evidence to support this assertion. The Great Depression did not get worse as the government did more. GDP went up, unemployment went down, and just in case the correlation wasn't obvious, that progress was temporarily reversed once austerity measures were implemented around 1937. We even see modern-day examples of this: the UK has given itself another recession with spending cuts and tax increases. Keynesians even called that one before it happened, as soon as they saw what the Cameron government intended to do.

Quote
Just saying its the worse recession or its a financial recession is meaningless. We have no analysis in this thread showing the gov't intervention made things better. I've shared some articles showing how it made things worse, to which you responded "well as Dave Axlerod says blah blah blah." Completely useless rhetoric.
This characterization of my replies to you, is completely out of line. You've ignored a bunch of points that I've made on this subject, none of which have anything to do with Axelrod. It's your prerogative to not respond to them, but you can't have it both ways.

Quote
Can you support your hypothesis about financial recessions?
It's not my hypothesis. Read some Reinhart and Rogoff, specifically This Time Is Different: Eight Centuries of Financial Folly. It's too big a subject for a thread, or even an article.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #115 on: December 20, 2012, 01:02:39 PM »

Offline Cman

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Quote
Can you support your hypothesis about financial recessions?
It's not my hypothesis. Read some Reinhart and Rogoff, specifically This Time Is Different: Eight Centuries of Financial Folly. It's too big a subject for a thread, or even an article.

I've been reading the book. Very interesting, well written and well researched. I recommend it to anyone who wants some historical perspective on financial crises.
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #117 on: December 21, 2012, 10:16:44 AM »

Offline Cman

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Is this a good description: http://seekingalpha.com/article/171610-crisis-in-context-this-time-is-different-eight-centuries-of-financial-folly-by-carmen-m-reinhart-and-kenneth-s-rogoff

Looks like a fair description of what's in the book.

The title really says a lot about the conclusions in the book: every time the warning signs of a financial crisis arise, policy makers say to themselves "this time its different". This was perhaps most egregious in the 2008 crisis. We tend to associate financial crises as something that happens in developing economies, not developed economies. So, when the warning signs started popping up in the US, policy makers said "this time its different"....
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #118 on: December 21, 2012, 10:22:39 AM »

Offline angryguy77

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I keep hearing this was the worst financial crisis since the 30's. I remember Clinton telling us that GWB's recession was the worst since the depression. I'm confused, shouldn't this be the worst since the 90's?

Clinton had to be right, we all know politicians who say these things are not doing it for political purposes.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #119 on: December 21, 2012, 12:23:24 PM »

Offline Cman

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I keep hearing this was the worst financial crisis since the 30's. I remember Clinton telling us that GWB's recession was the worst since the depression. I'm confused, shouldn't this be the worst since the 90's?

Clinton had to be right, we all know politicians who say these things are not doing it for political purposes.

What's confusing about it? This was the worst financial crisis in the US since the Great Depression. I haven't heard anyone argue otherwise.

The recession associated with it was the worst since the Great Depression, depending on what factors you look at (eg: length of recession, GDP decline). ALong other factors, though (e.g.: unemployment), I think the 70s/80s were worse (IIRC).

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