Drunken Idaho wrote:I'm no expert, but I'm also pretty confident in a rebound. I say within a year or two, we'll see a positive change in direction of the markets. The trade-off is that the world will come out a little bit shuffled. New rules will be in place about how money is lent and spent, and the US will probably no longer be the superpower they once were. I see a lot of news/talk programs speculating about the US's loss of that status, and a lot of people seem to fear such a notion, however I welcome it. It's not just because I'm Canadian, I also happen to think it will be a healthy change for both the world and the people of the US. I mean, America saw more than 60 years of prosperity. They, along with the rest of western civilization, allowed themselves to become fat and complacent, and now it's time to start living intelligently. This is all very good and cleansing, trust me. It's all about the long-run.
In some ways I agree, the current recession (don't think its anywhere bad enough to really compare it with the 30's, yet anyway) cold be good in the long run. The long lasting growth and prosperity gave people more faith in the market than it deserved, people started to spent more than they should, or even spent it in amazingly stupid ways... since it could only get better! It could only go up.
Getting a shock, to take us out of that 'over-confidence' in the market, could certainly be good for society as a whole (obviously not for those who end up unemployed). If the lesson last beyond the recession itself, which might be unlikely.
I doubt the current crisis will have any effect whatsoever on the power balance in the world however, as hard as the US is hit currently, other major powers are affected as much, and the US are probably better suited for a rebound than for example China is.
I dont get how people can believe the government (In US as well as elsewhere) shouldn't make spending bills, shouldn't save the financial sector etc. Its not just about the spending itself, which might or might not have a major effect on the economy, its just as much about sending the signal that sometjhing is done, that someone is trying to stop the negative trend. Fear and uncertainty is what drives the economy beyond what is reasonable in a recession, people believe everything is going to end, they stop spending etc. and thus hurting the economy more than the actual financial problems give reasons to. Spending bills is just as much about convincing people everything is fine (whether it is or not) as it is actually helping the economy directly.
Whether all the money is soent in the best way can certainly be discussed. And obviosuly they never will. Too many earmarks, too many conflicting interests got a chance to influence the bill, which is of course sad. But not getting the perfect deal (which never happens, especially not given the US history of earmarks and lobbying) rarely means no deal at all is the better choice.
Or maybe Obama really is a socialist in disguise, who is using the recession to make the evil nasty government grow too big for the republicans to stop it again.
Just like the Bush government used 9/11 to further its own ideas.
Phaedrus wrote:Basic Keynesian macroeconomics says that the best thing to do when you've got high unemployment, high inflation, and falling economic growth is to increase government spending and lower taxes. This is exactly what the government is doing...what's wrong with that again?
The problem is that Keynesian economics also says that when the economy is going strong, you should raise taxes and lower government spending. That's never been done before in this country.
Yes indeed. That has been a problem for a long time for US (imo).
Raising taxes got various benefits, one obviously is to get the money for spending later, as would be the case now.
The other is to calm down the economy on its highest, to reduce peoples spending, and for a national economy, although no one likes to state that anymore, with free trade and everything, to reduce their spending on goods from foreign countries.
Its just as dangerous not to control the good times as it is not to control the bad times (though conservatives/liberals (in US/EU context) would of course argue its better if there is no control in any of the cases).