Ask an Economist (Post #1005 and counting)

[GinandTonic]

If small Eurozone nation guarantying it's banks were to be forced into a level of direct debt that made it functionally unable to gain credit itself what would happen? Assuming the euro itself isnt broken how can it continue when someone who can print it is bust?

 

[bender19]

Given the current financial crisis and massive deficit where should the government look to cut spending first?

Cutting spending would probably be a bad idea, usually contractionary fiscal policy in what looks to be an inevitable recession would only make things worse. Spending really should have been cut when the economy was booming.

 

[Homie]

Well hello Lord Keynes, I believe you were debunked some years ago.

 

[Hygro]

As was classical economics in the macro field. Then both got revisions and now both are potentially valid.

 

[Cutlass]

Well hello Lord Keynes, I believe you were debunked some years ago.

And made a God just now

 

[Princeps]

Well hello Lord Keynes, I believe you were debunked some years ago.

No he wasn't, not his central tenets and observations, although I know the loonytarian fruitcakes at Mises like to think so.

 

[bender19]

Well hello Lord Keynes, I believe you were debunked some years ago.

You might want to read some more recent material. In the current climate it would be wrong to assume perfect capital mobility. In theory if we had perfect capital mobility fiscal policy would be impotent. Given the current credit crunch however capital mobility would be imperfect given this a decrease in government spending would in theory reduce output and make the crisis worse.

 

[Agent327]

Nice thread. Should be visited more often.

 

[RedRalph]

when we're told the FTSE (etc) is down 4.5%, is that on the previous days closing price or some other reference point?

 

[JerichoHill]

thats from the previous day's close

 

[RedRalph]

thats from the previous day's close

cheers. one more question: Is this our profession's Vietnam>?

 

[JerichoHill]

Huh? What do you mean?

Oh, and to reply above. Generally speaking, cutting government spending and tightening the money supply in a recession causes further recession.

Status quo, prolly best.

 

[RedRalph]

Economists Vietnam, as in, in 25 years, will you be telling someone "you dont understand man, you werent there in 08"?

 

[DNK]

Economists Vietnam, as in, in 25 years, will you be telling someone "you dont understand man, you werent there in 08"?

Or will it spit you out on the other side, an alcoholic missing limbs (those revolving doors can be dangerous), living day to day in misery and homelessness, lost in a world that has blamed its problems on you and gives you no thanks or mercy...

 

[Theige]

Economists Vietnam, as in, in 25 years, will you be telling someone "you dont understand man, you werent there in 08"?

We still have a ways to go before this crash is comparable to previous recessions.

We still have yet to reach 01-02 levels in the Dow (around -37%). Also the S&P dropped 50%

We are at about -33% right now, in both the Dow and S&P, but we've got plenty of time to get there!

And that 01-02 recession was the mildest we've ever had. There was basically a 15 year bear market, 1968-1983. In 1974 the market hit a 20 year low... So Economists' Vietnam was, during Vietnam

Terrible comparison btw

 

[RedRalph]

Just a joke BTW

 

[DNK]

Just a joke BTW

Oh, man, I thought we were all being serious...

But while we're on the topic of comparisons, JH, how do you think this will stack up against other economic recessions and rough periods?

 

[MagisterCultuum]

Why are people so worried about their housing prices falling? For those of us that don't plan to sell anytime soon, doesn't this mostly just mean lower property taxes?

 

[Homie]

You might want to read some more recent material. In the current climate it would be wrong to assume perfect capital mobility. In theory if we had perfect capital mobility fiscal policy would be impotent. Given the current credit crunch however capital mobility would be imperfect given this a decrease in government spending would in theory reduce output and make the crisis worse.

What are you talking about? Did you mean to quote some other post, because I do not see how this is relevant to my post at all. All I said is that Keynesian economics has been debunked, even by mainstream economists.
But if you wanna go there, I do not believe in perfect capital mobility (nor does anyone else) so why are you making it out like I do?

 

[JerichoHill]

Why are people so worried about their housing prices falling? For those of us that don't plan to sell anytime soon, doesn't this mostly just mean lower property taxes?

Bank's don't like it much when your mortgage is worth more than the home it backs up