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What's wrong with the economy? Nobody's sure. Fix it anyway!





ocalhoun
Source:
http://www.nytimes.com/2010/05/03/business/economy/03crisis.html?ref=todayspaper

Will the financial reform bill in congress right now even address the right problems?

While I do view regulation to be a far better choice than bailouts and buyouts (especially if done with the lightest touch possible), I fear that we'll get a 'fix' that's a mixture of a superficial cure, pork disguised as regulation, and special pet projects... and then the issue will be considered to be solved until the economy melts down again.


Quote:

Others simply argue that it is premature to pass sweeping legislation while so much about the crisis remains unclear and so many inquiries are in progress.


Quote:

“Until we understand what the causes were, we may be implementing ineffective and even counterproductive reforms,” said Andrew W. Lo, a finance professor at the Massachusetts Institute of Technology. “I understand the need for action. I understand the need for something to be done. But what I expect from political leaders is for them to demonstrate leadership in telling the public that we need to proceed about this in a much more deliberate and rational and thoughtful way.”

Note especially the possibility of counterproductive reforms; unless carefully planned, they could indeed have a negative effect.


And this guy has a point as well:
Quote:

A second group of critics say the government helped to seed the crisis through its efforts to increase home ownership, including the role of Fannie Mae and Freddie Mac in buying mortgage loans to make more money available for lending. The companies are now owned by the government after incurring enormous losses on loans that borrowers could not afford to repay.

Lawrence J. White, a finance professor at New York University, said it made no sense to overhaul financial regulation without addressing the future of federal housing policy. He said he was trying to find the strongest possible words to describe the omission of Fannie Mae and Freddie Mac from the legislation.

“It’s outrageous,” he finally said.

Though I doubt this housing policy was the sole cause of the economic problems, it certainly contributed.
deanhills
Government has to be completely reformed. I think the changes that are really needed are on the fundamental level where Congress and the Senate are completely restructured, and a lot of the dead wood cut out. Next on the list is to completely get rid of laws that are either redundant or no longer functional or efficient. Most businesses which are bankrupt go for major austerity bare bones measures, however Government seems to be functioning business as usual, and worse, creating packages such as Obamacare, that the country cannot afford at all. When is the Government going to buckle up?
MYP415
ocalhoun wrote:
While I do view regulation to be a far better choice than bailouts and buyouts (especially if done with the lightest touch possible), I fear that we'll get a 'fix' that's a mixture of a superficial cure, pork disguised as regulation, and special pet projects... and then the issue will be considered to be solved until the economy melts down again.

More politicians need to learn the concept of moral hazard. It played a huge role in this crisis and a lot of the "reform" currently being suggested will only further government insurance and likely encourage yet another blow up.
Nick2008
deanhills wrote:
Government has to be completely reformed.


Hehe, completely reforming government? We can't even partially reform healthcare!
I would also think that the Supreme Court would prohibit any major changes to the structure of Congress and Senate on the ground of unconstitutionality. It's a good idea to restructure government, but who has the ability and willingness to do that?
menino
I so believe that the Government is trying to fix the economy, and it is going to take time, mainly due to the mess that was created by the previous govt. (needless to say, BUSH!), but the fact that they are now being pointed out for the housing loan is quite a shocker.
Housing loans were the dealt with by banks mainly, so I don't quite see that even if the government said to allow more people to have housing, that the banks would have to remove checks in getting a housing loan.

In any case, fixing the economy will take time.
I wished it would be faster, and fixed already, but its not that simple.


Perhaps the financial reform bill may not solve the current economy, but hopefully its a long term goal. I don't think there is a short term goal (like the economic boost / catalyst) that was given to the motor companies and some financial institutions which were misused.
Hopefully this financial reform bill will address the most important issues and pave the way to stability.

Regarding the cause of the financial meltdown... yes, no one seems to have a concrete answer to this as yet, and I think that if they do, a lot of big heads might roll.
iman
The economy shrinks because of greed. I think these economic problems happen because of several monopolies. So basically, it's the war between business and economics.
ocalhoun
menino wrote:
I so believe that the Government is trying to fix the economy, and it is going to take time, mainly due to the mess that was created by the previous govt. (needless to say, BUSH!)

Untimely Bush-bashing aside, the government is trying to fix the economy... just as it has many times before. And it often even succeeds for a time.
But they never attack the root cause- the problem that makes their regulations atrophy and keeps whistle-blowers at bay: political corruption. The corporations buy politicians, the politicians change the rules so the corporations can make more money. Problem is, when those rules are taken away, economic crashes often happen.

iman wrote:
The economy shrinks because of greed.

You've got it a bit backwards there. Greed is the main force behind economic growth... Though an overdose of greed combined with a lack of rules can cause a melt-down.
Quote:
I think these economic problems happen because of several monopolies. So basically, it's the war between business and economics.

Indeed 'monopolies'* did play an important roll in the problem.
With intelligently applied regulation, the 'war between business and economics' could be resolved.

*More accurately, simply institutions that are too large.
deanhills
ocalhoun wrote:
the government is trying to fix the economy... just as it has many times before. And it often even succeeds for a time.
Difficult to "fix" the economy when the Government's very existence depends on some of the decisions that are bad ones for the economy. Would probably be much better if an independent panel be appointed with the top talent of economists in the country, who are completely unbiased (if that is possible at all), to be given a mandate to fix the economy. Governments are just too much involved, to really make long-term decisions that can fix the economy.
Alaskacameradude
Ya, see the big problem is well.....the government itself. See, to get elected, politicians promise things like no new taxes, lots of new government services for their district or for everyone, and even if it
is just for their district, they have to 'trade' with other politicians who want things for districts as well, to get enough votes. This leads to....you guessed it.....big huge deficits. Deficit spending has always
been popular policy in the past. It seems to be becoming less popular as the Tea Party people seem
to have adopted that as one of the big things they are against. However, until we see some politicians
who do more than TALK a good game about the deficit, there will be a problem.
deanhills
Alaskacameradude wrote:
Ya, see the big problem is well.....the government itself. See, to get elected, politicians promise things like no new taxes, lots of new government services for their district or for everyone, and even if it
is just for their district, they have to 'trade' with other politicians who want things for districts as well, to get enough votes. This leads to....you guessed it.....big huge deficits. Deficit spending has always
been popular policy in the past. It seems to be becoming less popular as the Tea Party people seem
to have adopted that as one of the big things they are against. However, until we see some politicians
who do more than TALK a good game about the deficit, there will be a problem.
Right. Looks as though it has become part of the system. Politicians are so used to that, they can't even see it for what it is. They even think it is good for the economy, to save the economy from itself!
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