It's a little like having a new New Deal, but you have to do it before the Depression. Not After.

[Amerigo Vespucci]

Run time: 01:02 https://www.youtube.com/watch?v=X-5SeA9jDQo   Posted on YouTube: November 23, 2008 By YouTube Member: Views on YouTube: 0   Posted on DU: November 23, 2008 By DU Member: Amerigo Vespucci Views on DU: 1218

 
Chuck Schumer on This Week:

In an interview with ABC's This Week, Schumer said, "I believe we need a pretty big package here," Schumer said, adding that Congress is working on getting the economic package to president elect Barack Obama by inauguration day. "I think it has to be deep. In my view, it has to be between $500 and $700 billion dollars and that's because our economy is in serious, serious trouble."


"It's a little like having a new New Deal, but you have to do it before the Depression. Not after," Schumer added.

[Warpy]

1. We're getting a new administration at the equivalent

of the year after Hoover took office.

In other words, we have the potential of not having to endure 3 years of GOP mismanagement caused by their fundamental economic fallacy that our economy works from the top down.

If the Democrats are motivated and allowed to act quickly, we could escape this with only a deep recession.

If not, we will repeat at least a couple of the Hoover years with all too predictable consequences.

Obama's rhetoric suggested he knows what needs to be done. What remains to be seen is if he's a manager who is capable of kicking his DLC subordinates hard enough to force them to do the right thing.

[Cleita]

2. I'm afraid it's going to take us at the grass roots level

kicking him hard enough so that he kicks his DLCers even harder.

[Zynx]

3. A modern day financial crisis moves fast due to infromation flow.

Also, this collapse has been taking place since August of last year and the real estate decline was even before that. We've endured at least a full year of economic turmoil. This didn't just start in September.

[Warpy]

4. You're correct that the initial collapse

that forced institutional investors to start looking closely at their asset columns happened in August, 2007. However, the hedge fund selloff that triggered a panic selloff of assets by all sorts of investors didn't occur until last summer.

The real recession has been ongoing for anyone who works for a living for many years, with Washington fudging all the numbers to make unemployment look low, wages look high, and inflation flat to make people who aren't paying attention think everything is rosy. The truth is that it hasn't been particularly rosy for working people since 1999. A similar recession for working people including a steep decline in real estate values happened in the 1920s, too, well ahead of the crash.

This mess will be reckoned from this summer's steep stock market crash, IMO, even though the whole picture is far more complex, as we both know, just as the Depression was reckoned from the 1929 crash--even though the whole picture then was just as complex and problems just as longstanding.

Still, we don't have 3 years of a dreary, incompetent GOP administration to endure the way they did in 1929, and that was my point.

[Zynx]

5. My point was that macro economic indicators have been in decline for some time.

Hell, GDP actually contracted 4th quarter of last year. A fair number of institutions were brought to the brink in August of last year and Countrywide and Bear Stearns were gone by March of this year. Unemployment began to increase in January of this year and home sales had already completely collapsed by the summer of last year. Indeed, the absolute crash of the stock market will be the emblematic event of this long recession, but I think history will date the beginning of the mess to before this. The reason that even though the Depression actually began before the stock market crash in 1929 they do not date it as such is because economic data was so weak back then. Now we have a lot more data sets to help us figure out when declines started to occur, rather than relying on purely anecdotal evidence.

[tclambert]

7. You guys sound like you're in complete agreement but still arguing.

You agree the beginning of the problem now and for the Great Depression actually started before the big stock market crashes. The one point Warpy makes that Zynx didn't directly address is that this being an election year, we have a new Sheriff riding into town in a couple of months, whereas in 1929, the nation had to wait until 1933 for the new guy with his New Deal. That extra three years under a pretty much laissez faire, or "do nothing, let the market sort this out its own self" leader made it that much worse. Our new sheriff has a chance to, as Barney would say, "Nip it in the bud."

We also have the advantage of having seen what worked and what didn't for FDR way back when. And I know there's a movement afoot in the Libertarian world and part of the Republican world to claim everything FDR did was wrong. But that's just stupid. The part that worked was jobs. Create jobs, even if they are make-work jobs, and that jump starts the economy. I heard a theory this would work even if the government picked a silly project like building a pyramid. Honest. Fixing roads, bridges, and the energy infrastructure, like Obama says he wants to do makes a tad more sense. A lot of economic historians believe the real solution to the Great Depression was the enormous government jobs program known as World War II. Nobelist Paul Krugman recently re-iterated this on one of the roundtable shows. He added that Roosevelt actually had made great progress by 1937, but then was persuaded to try balancing the budget and undid some of the progress.

I have confidence the smart guy will learn from history and make the right moves even more expeditiously that FDR did. This will leave the Republicans scrambling to claim that it was really the brilliance of George W. Bush in his last few months in office that turned everything around. I predict Ann Coulter will actually say those words at some point.

[humbled_opinion]

9. That is why

It is important for all of us to ensure that the media is telling the truth in regard to how we dig ourselves out of this mess. Obama has the right plan but already his economic policies get mixed reviews in the media some are saying now that he will not raise the tax rates on the very wealthy even before he gets a chance to actually sit in the Oval Office. Hold them to the truth.

[D-Lee]

6. Maybe we should suspend the "mark to market" rule?

A lot of intelligent economic commentators say, the "mark to market" rule is causing the internal deficiencies in the bank balance sheets.

It would cost NO MONEY to suspend the rule.

And there is no "investing public" to protect because everyone knows about the problem by now.

Worth a thought.

[tclambert]

8. The thing that has worried me is the 100 to 1 leveraging.

Which means lenders have been loaning out money they don't have, loaning the same dollar a hundred times over, counting the loan itself as the asset to back the loan. They were essentially gambling that borrowers will be able to repay. And if they didn't, the lender might find himself bankrupt many times over. That wasn't supposed to be able to happen with Mortgage Backed Securities because mortgages are secured by the value of the house. And house prices are supposed to always, always go up. And then they went down. People found themselves "upside down" on their mortgages, owing more than the house was worth. Oftentimes they noticed this just as their complex modern mortgage adjusted to some new, higher payment level. And a lot of them walked away, or were driven away, and the bank took the hit. And every foreclosure worked to lower house prices a little more, exacerbating the cylce.

If you build a house of cards, you gotta expect sooner or later, it's gonna fall. Somebody has to take responsibility to think about the long term. Most of the time what's good in the short term works out in the long term, too. But not always.