What's for lunch? The taxpayers!
Is that arugala on their plates? The elites are addicted to that sh!t and wagyu beef too
Posted on 03/23/2009 11:45:01 PM PDT by 4rcane
http://dailybail.com/home/must-see-bank-bailout-news-james-galbraith-says-geithner-ban.html
We think Geithner is suffering from five fundamental misconceptions about what is wrong with the economy. Here they are:
The trouble with the economy is that the banks aren't lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it. As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem. The banks, meanwhile, are lending. They just aren't lending as much as they used to. Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed.
The banks aren't lending because their balance sheets are loaded with "bad assets" that the market has temporarily mispriced. The reality: The banks aren't lending (much) because they have decided to stop making loans to people and companies who can't pay them back. And because the banks are scared that future writedowns on their old loans will lead to future losses that will wipe out their equity.
Bad assets are "bad" because the market doesn't understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are. House prices have dropped by nearly 30% nationwide. That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion). The banks don't want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer.
Once we get the "bad assets" off bank balance sheets, the banks will start lending again. The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating. So they'll sit there and say they are lending while waiting for the economy to bottom.
Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears, and they'll be working it off for years. House prices are still falling. Retirement savings have been crushed. Americans need to increase their savings rate from today's 5% (a vast improvement from the 0% rate of two years ago) to the 10% long-term average. Consumers don't have room to take on more debt, even if the banks are willing to give it to them.
The two charts below from Ned Davis illustrate the real problem: An explosion of debt relative to GDP. The first is Nonfinancial Debt To GDP. The second is Total Debt To GDP.
In Geithner's plan, this debt won't disappear. It will just be passed from banks to taxpayers, where it will sit until the government finally admits that a major portion of it will never be paid back.
Whatever your opinion of Geithner or his plan, Galbraith is a quack of an economist, just like his famous father. He is currently taking advantage of a government-created crisis to further extend the government’s powers. Even left-wing hack Paul Krugman would call him an idiot.
In fact, quoting from wikipedia:
“Paul Krugman, the influential, Nobel Prize–winning Princeton University professor and New York Times op-ed columnist, has denigrated Galbraith’s stature as an economist. In Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations, he calls Galbraith a “policy entrepreneur” – an economist who writes solely for the public, as opposed to one who writes for other professors, and who therefore makes unwarranted diagnoses and offers over-simplistic answers to complex economic problems. He asserts that Galbraith was never taken seriously by fellow academics, who viewed him as more of a “media personality”. For example, Krugman believes that Galbraith’s work The New Industrial State is not considered to be “real economic theory”, and that Economics in Perspective is “remarkably ill-informed”.”
James is pretty much in the same boat intellectually as his dad.
All may be as you say, but using Paul Krugman as a critic won’t ever help make your point.
using Paul Krugman as a critic won’t ever help make your point.
For those of us not “in on it”, an example of why, might help.
I don’t care who Paul Krugman is ,, this article has the ring of truth about it...
Krugman is a left-wing flack with virtually no credibility as an economist - or as anything else for that matter.
Of course it does. I never denied that, only that dragging Paul Krugman in does nothing to establish credibility.
TALF is all (possible) upside for investors such as hedge funds who put up a lousy 5% while the taxpayers put up 95% and will absorb the losses.
IOW hedgies and other brave souls are given 20-1 leverage by 0bomo/Guithner. Isn’t this what got us into this mess in the first place?
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