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Could Govt support a second Great Recession ?
Old 05-19-2015, 02:31 PM   #1
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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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Old 05-19-2015, 02:34 PM   #2
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Tool #1 is cutting rates which currently have no more room to cut.
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Old 05-19-2015, 03:07 PM   #3
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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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Old 05-19-2015, 03:17 PM   #4
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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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Old 05-19-2015, 03:20 PM   #5
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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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Old 05-19-2015, 03:26 PM   #6
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Originally Posted by Tadpole View Post
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.
$10,000 refundable tax credits for everyone, only requirement is that the money was spent, not saved.
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Old 05-19-2015, 05:53 PM   #7
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$10,000 refundable tax credits for everyone, only requirement is that the money was spent, not saved.
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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Old 05-19-2015, 05:58 PM   #8
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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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Old 05-19-2015, 06:42 PM   #9
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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?
I don't think so.

As a thinker and an early member (1985), my choice would be for "A Just Third Way" ... Here:
Welcome to CESJ! - Center for Economic and Social Justice | Center for Economic and Social Justice

Few who have read Loiis Kelso's "The Capitalist Manifesto" come away unaffected.

I especially like the code of ethics:
http://www.cesj.org/about-cesj/what-...ode-of-ethics/
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Old 05-19-2015, 10:28 PM   #10
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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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Old 05-20-2015, 06:46 AM   #11
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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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Old 05-20-2015, 07:01 AM   #12
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What I doubt we would see is an aggressive bipartisan response on the Hill which might really send a message.

On that, i expect, we may all agree.



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Old 05-20-2015, 07:10 AM   #13
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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?
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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Old 05-20-2015, 02:51 PM   #14
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Why worry about that bridge now?
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Old 05-20-2015, 03:19 PM   #15
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Why worry about that bridge now?

...Said the globally recognized brilliant owners of LTCM before they brought the country down to it's knees.


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Old 05-20-2015, 03:30 PM   #16
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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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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 ?
Old 05-20-2015, 03:35 PM   #17
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Could Govt support a second Great Recession ?

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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 .

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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Old 05-20-2015, 05:31 PM   #18
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...Said the globally recognized brilliant owners of LTCM before they brought the country down to it's knees.
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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Old 05-20-2015, 06:41 PM   #19
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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.

They were the epicenter of the recession, and arguably put the world system at risk.


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Old 05-20-2015, 07:22 PM   #20
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They were the epicenter of the recession, and arguably put the world system at risk.
The LTCM problems were in the fall of 1998. There was a sharp downturn in August 1998 but no recession.
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