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Could Govt support a second Great Recession ?
05-19-2015, 01:31 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Jun 2014
Posts: 1,069
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Could Govt support a second Great Recession ?
For all the thinkers out there, if we had a great recession part two in the next couple years, could the US govt (and foreign) use the tools they did last time to get us through a second time?
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05-19-2015, 01:34 PM
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#2
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gone traveling
Join Date: Sep 2003
Location: DFW
Posts: 7,586
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Tool #1 is cutting rates which currently have no more room to cut.
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05-19-2015, 02:07 PM
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#3
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Join Date: Jul 2004
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So dallas27, suppose you are a responsible party - member of Fed, President, Congress critter, etc.
With rates at zero, what would you do if the economy was in collapse? If you come up with a good plan, please share.
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05-19-2015, 02:17 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Not an unreasonable question to ask as currently on average we are already past due for another run of the mill recession.
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05-19-2015, 02:20 PM
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#5
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Join Date: Jul 2005
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Don't know for the US , but Japan has been holing on through many great recessions starting in the 1980's ( IMO ) , partly with the near zero rates and gov. stimulus spending.
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05-19-2015, 02:26 PM
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#6
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Quote:
Originally Posted by Tadpole
So dallas27, suppose you are a responsible party - member of Fed, President, Congress critter, etc.
With rates at zero, what would you do if the economy was in collapse? If you come up with a good plan, please share.
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$10,000 refundable tax credits for everyone, only requirement is that the money was spent, not saved.
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05-19-2015, 04:53 PM
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#7
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
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Cool! That's my excuse to buy that expensive Nikon D4s camera ($6k) and a couple of lenses that I've been drooling after wanting.
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05-19-2015, 04:58 PM
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#8
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Join Date: Feb 2007
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Like Ben said, as last resort just shovel money out of that proverbial helicopter. I believe Ms. Janet has applied for her helicopter pilot's license... I think the government has lots of choices other than interest rates as long as the political will is there. If however, the Government response is like it was back in 1929 i.e. just stand back and let the market take care of things on its own- not so much.
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05-19-2015, 09:28 PM
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#10
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Full time employment: Posting here.
Join Date: May 2014
Location: Lakewood
Posts: 919
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Imoldernu, I've been meaning to read a Capitalist Manifesto. I'll move it higher in my queue.
Does the Third Way involve using sound money?
As a free marketer, I'd welcome the government stepping aside and letting things sort themselves out and rebound. I think Amity Schlaes made a convincing point that the New Deal meddling prolonged recovery until AFTER WWII and many of the confusing and conflicting social programs were disbanded. The super wealthy would get hurt the most (relatively) and the poorest wouldn't notice a change. Those with talent and agile skills would rise and lift the economy.
Please pardon my Blue Skies verbiage, but I get emotional about red tape inertia.
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05-20-2015, 05:46 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Who knows. The Fed can print money till the cows come home. Lots of predictions for hyper inflation and destruction from the stimulus we already went through and here we are still waiting. Seems like eventually something has to give but Krugman would undoubtedly vote for an aggressive response and he knows more about this than we do. What I doubt we would see is an aggressive bipartisan response on the Hill which might really send a message.
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05-20-2015, 06:01 AM
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#12
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Join Date: Jun 2014
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Quote:
Originally Posted by donheff
What I doubt we would see is an aggressive bipartisan response on the Hill which might really send a message.
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On that, i expect, we may all agree.
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05-20-2015, 06:10 AM
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#13
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Join Date: May 2014
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Quote:
Originally Posted by dallas27
For all the thinkers out there, if we had a great recession part two in the next couple years, could the US govt (and foreign) use the tools they did last time to get us through a second time?
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Just finished reading Timothy Geithners book, found it very insightful.
In terms of recession fighting, I think so. Whether the political will is there to act on it, which is more important, seems impossible to answer upfront.
In terms of tackling another banking crisis, apparently the US congress took away some tools (emergency powers) to stop panics, so those won't be available anymore when disaster (first) strikes.
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05-20-2015, 01:51 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Why worry about that bridge now?
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05-20-2015, 02:19 PM
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#15
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Quote:
Originally Posted by Lsbcal
Why worry about that bridge now?
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...Said the globally recognized brilliant owners of LTCM before they brought the country down to it's knees.
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05-20-2015, 02:30 PM
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#16
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Quote:
Originally Posted by dallas27
...Said the globally recognized brilliant owners of LTCM before they brought the country down to it's knees.
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IIRC , some of the principals at LTCM received the Nobel prize a couple of years before they went into the dumpster .
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Could Govt support a second Great Recession ?
05-20-2015, 02:35 PM
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#17
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Could Govt support a second Great Recession ?
Quote:
Originally Posted by Lakewood90712
IIRC , some of the principals at LTCM received the Nobel prize a couple of years before they went into the dumpster .
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Ya, they solved a longstanding math problem of how to (perfectly) hedge risk, and properly price options. And they were right mathematically. In the real world they were right, and profited bigtime, until they were not. Ultimately, they lost a bet on how long it took the market to return to the correct pricing. The saying is that the market prices can remain irrational longer than your model can remain solvent, despite being right.
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05-20-2015, 04:31 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by dallas27
...Said the globally recognized brilliant owners of LTCM before they brought the country down to it's knees.
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Maybe you could expand on this?
I don't see the connection between LTCM and a general recession which was the OP concern. LTCM was a short term equity market crisis that did not get into the general economy.
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05-20-2015, 05:41 PM
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#19
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Quote:
Originally Posted by Lsbcal
Maybe you could expand on this?
I don't see the connection between LTCM and a general recession which was the OP concern. LTCM was a short term equity market crisis that did not get into the general economy.
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They were the epicenter of the recession, and arguably put the world system at risk.
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05-20-2015, 06:22 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by dallas27
They were the epicenter of the recession, and arguably put the world system at risk.
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The LTCM problems were in the fall of 1998. There was a sharp downturn in August 1998 but no recession.
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