Why the bailout will be a disaster

[Dissipate]

Originally posted by: Evan Lieb
It's always kind of sad to see laymans point to Peter Schiff as their best example of someone who "predicted" this crash with any accuracy. The only reason libertarians or Paulbots support the guy is exactly because he was Ron Paul?s economic advisor. Here are the facts on Schiff:

1) He uses the Webster definition of inflation instead of the accepted definition of inflation used by economists across the globe. He claims inflation is probably closer to 10% yet when pressed to come up with a methodology for calculating inflation, he falls flat on his face and literally says "I just know that the way the government calculates it is wrong".

2) He claims that the Federal Reserve, including Bernanke and others, purposefully lie and distort inflation numbers (among other statistics). When asked what Bernanke's motivation would be and why Greenspan, Volcker, and every Fed supervisor and economic advisor split between half a dozen Democrat/Republicans administrations over the last several decades didn't pick up on his conspiracy to trick consumers into using false inflation and economic statistics, Schiff is notably silent and has no explaination. http://www.youtube.com/watch?v=ucDkoqwflF4

3) Schiff then goes on to make the laughably ridiculous claim that a collapse of the U.S. economy will benefit the rest of the global economy because of the eventual collapse of the U.S. dollar; http://www.youtube.com/watch?v=iR_ssZzQyYQ. No mention that every crash and recession in modern history (81-82, 87, 91-92, 00-01) was followed or simultaneous with a global slowdown.

4) He is in fact a conspiracy theorist and has been on the Alex Jones show for a while now: http://www.youtube.com/watch?v=H5vGxCCdesM

Bottom line, Schiff doesn't understand why inflation is calculated the way it is because, sadly, he's not very well informed on marcoeconomic theory. Which makes some sense considering he was Ron Paul's economic adviser.

You will find information on the government's distorted statistics at:

Shadow Stats

It's run by an analyst whose job entailed doing accurate forecasts for the private sector based on real data, not government funny numbers. Because his clients ended up getting bad results when they used the government's figures to do forecasting.

I am not a fan of the Ron Paul campaign by any stretch of the imagination, but I do agree with Schiff's economic analysis of the situation.

 

[LegendKiller]

Originally posted by: Dissipate

Originally posted by: Evan Lieb
It's always kind of sad to see laymans point to Peter Schiff as their best example of someone who "predicted" this crash with any accuracy. The only reason libertarians or Paulbots support the guy is exactly because he was Ron Paul?s economic advisor. Here are the facts on Schiff:

1) He uses the Webster definition of inflation instead of the accepted definition of inflation used by economists across the globe. He claims inflation is probably closer to 10% yet when pressed to come up with a methodology for calculating inflation, he falls flat on his face and literally says "I just know that the way the government calculates it is wrong".

2) He claims that the Federal Reserve, including Bernanke and others, purposefully lie and distort inflation numbers (among other statistics). When asked what Bernanke's motivation would be and why Greenspan, Volcker, and every Fed supervisor and economic advisor split between half a dozen Democrat/Republicans administrations over the last several decades didn't pick up on his conspiracy to trick consumers into using false inflation and economic statistics, Schiff is notably silent and has no explaination. http://www.youtube.com/watch?v=ucDkoqwflF4

3) Schiff then goes on to make the laughably ridiculous claim that a collapse of the U.S. economy will benefit the rest of the global economy because of the eventual collapse of the U.S. dollar; http://www.youtube.com/watch?v=iR_ssZzQyYQ. No mention that every crash and recession in modern history (81-82, 87, 91-92, 00-01) was followed or simultaneous with a global slowdown.

4) He is in fact a conspiracy theorist and has been on the Alex Jones show for a while now: http://www.youtube.com/watch?v=H5vGxCCdesM

Bottom line, Schiff doesn't understand why inflation is calculated the way it is because, sadly, he's not very well informed on marcoeconomic theory. Which makes some sense considering he was Ron Paul's economic adviser.

You will find information on the government's distorted statistics at:

Shadow Stats

It's run by an analyst whose job entailed doing accurate forecasts for the private sector based on real data, not government funny numbers. Because his clients ended up getting bad results when they used the government's figures to do forecasting.

I am not a fan of the Ron Paul campaign by any stretch of the imagination, but I do agree with Schiff's economic analysis of the situation.

Yeah "real" numbers that really don't take into account the improvement in goods.

There will be no "hyperinflation" and this bailout will prove to be a boon for the world.

 

[Squisher]

I don't know if the bailout will work, but I know that debt is the oil that greases the economy. You can argue that that needs to change and we need some hard times to fix this, but when the engine seizes up it won't be pretty. Living through the "buddy can you spare a dime" version 2008 will be more like The Lord of the Flies.

 

[NoStateofMind]

Originally posted by: LegendKiller

There will be no "hyperinflation" and this bailout will prove to be a boon for the world.

Quoted for future reference.

I forget why they removed the M3 reports LK, could you be so kind as to remind me? Also explain why those numbers are/aren't needed. Thank you.

 

[chess9]

Originally posted by: Skoorb
It occurred to me early on that $700B was certainly not going to cure an economic catastrophe. Either the catastrophe is unavoidable and/or would require into the trillions, or this has been overblown. In any case, I think the safe money is betting against the $700B stimulating lending to a massive degree and helping us avoid a recession/cleaning things up or any other such fanciful notions it was supposed to help with.

Anyway, I put it in my sig already [/q

Skoorb:

Yes, this is a distinct possibility. It's one of the most frequently mentioned possibilities by economists on the web. I think Wall Street is now thinking this may be the case! That means big trouble in the markets IF that is the psychology.

If you are an investor or bank with a troubled asset you are going to want the Treasury to buy it only if it saves you or buys you time. Many of these banks are way past outta' time, many have derivatives that are so disconnected from the real thing (real estate) that they have little or no value, and the stuff with value will go elsewhere. So, what is Treasury going to buy? They will end up buying all the SHIT. Like the stuff many banks have already written off.

And that's my view of why this buyout is stupid. The markets don't work like this. We aren't bailing out Chrysler and 20,000 jobs. And it's an almost bottomless pit...at least compared to a trillion dollars. 100 trillion is probably closer to the real exposure.

These are just my guesses based on experience, and what I've read. I'm sure I'm wrong, and I'm sure I'll be told I'm wrong.

-Robert

 

[First]

Originally posted by: Dissipate

You will find information on the government's distorted statistics at:

Shadow Stats

It's run by an analyst whose job entailed doing accurate forecasts for the private sector based on real data, not government funny numbers. Because his clients ended up getting bad results when they used the government's figures to do forecasting.

I am not a fan of the Ron Paul campaign by any stretch of the imagination, but I do agree with Schiff's economic analysis of the situation.

Yes, I've seen that and dismissed it immediately when they openly admitted they couldn't come up with a better way to calculate inflation that didn't distort domestic consumer prices at the other end of the spectrum of inflation calculations. That's why you don't see anyone, anywhere, in any reputable economics institution claiming CPI is some covert attempt by the government to trick consumers. It's nonsense because it would have been picked up by any first year PhD Econ graduate student. The way these statistics are calculated are transparent, and it would be blatantly obvious if there was mischievous distortion. Reality just isn't that interesting.

Btw, Schiff has gotten (and will get) several major predictions wrong. He has specifically said gold will be at $2000 next year and $5000 in 2012 (with the later being far more laughable than the former). He claimed one year ago last month that the dollar would half the value it was at that time one year ago last month ($0.7207 against the Euro). He said this here: http://www.youtube.com/watch?v=Fa4pmGoca0Q. Currently, the dollar is trading at $0.7214 against the Euro, so he got that dead wrong. He claimed bond interest rates would skyrocket back up to the levels we saw in the early 1980's (14%-ish depending on the length of the promissory notes), but instead bond rates currently are at low single digit rates, including 30 year yields. Dead wrong again.

Schiff's single claim to fame would be oil, which apparently he bought in early 2002 before it was obvious the U.S. was going to go into Iraq. So he got that right, but for the wrong reasons. Congrats Schiff fans!

 

[LegendKiller]

Originally posted by: PC Surgeon

Originally posted by: LegendKiller

There will be no "hyperinflation" and this bailout will prove to be a boon for the world.

Quoted for future reference.

I forget why they removed the M3 reports LK, could you be so kind as to remind me? Also explain why those numbers are/aren't needed. Thank you.

Because it doesn't really tell you anything? It's a pretty worthless measurement.

I love how people were crying to predict inflation, saying what we were experiencing was so much dollar inflation. Yet, when oil collapsed, inflation went down, they failed to take that into account.

Tunnel vision tools rarely think of anything outside of their knowledge. Your knowledge is encapsulated by Austrian bullshit economics, blogs, and RPB propaganda. It's no wonder why you and your kind will never make up more than 3% of the population.

 

[LegendKiller]

Originally posted by: Evan Lieb

Originally posted by: Dissipate

You will find information on the government's distorted statistics at:

Shadow Stats

It's run by an analyst whose job entailed doing accurate forecasts for the private sector based on real data, not government funny numbers. Because his clients ended up getting bad results when they used the government's figures to do forecasting.

I am not a fan of the Ron Paul campaign by any stretch of the imagination, but I do agree with Schiff's economic analysis of the situation.

Yes, I've seen that and dismissed it immediately when they openly admitted they couldn't come up with a better way to calculate inflation that didn't distort domestic consumer prices at the other end of the spectrum of inflation calculations. That's why you don't see anyone, anywhere, in any reputable economics institution claiming CPI is some covert attempt by the government to trick consumers. It's nonsense because it would have been picked up by any first year PhD Econ graduate student. The way these statistics are calculated are transparent, and it would be blatantly obvious if there was mischievous distortion. Reality just isn't that interesting.

Btw, Schiff has gotten (and will get) several major predictions wrong. He has specifically said gold will be at $2000 next year and $5000 in 2012 (with the later being far more laughable than the former). He claimed one year ago last month that the dollar would half the value it was at that time one year ago last month ($0.7207 against the Euro). He said this here: http://www.youtube.com/watch?v=Fa4pmGoca0Q. Currently, the dollar is trading at $0.7214 against the Euro, so he got that dead wrong. He claimed bond interest rates would skyrocket back up to the levels we saw in the early 1980's (14%-ish depending on the length of the promissory notes), but instead bond rates currently are at low single digit rates, including 30 year yields. Dead wrong again.

Schiff's single claim to fame would be oil, which apparently he bought in early 2002 before it was obvious the U.S. was going to go into Iraq. So he got that right, but for the wrong reasons. Congrats Schiff fans!

Shhh. Don't speak the truth or bash their messiah of economics. He is infallible.

I am going to love when gold hits 700 and keep going lower.

 

[chess9]

Originally posted by: K1052

Originally posted by: chess9


4. All of this ties up our credit and our budget and doesn't allow any wiggle room for other programs and other emergencies. What if we get involved in a major war next year? What if we have an infectious disease outbreak? 10 Katrinas? Etc. What ever happened to saving for a rainy day? LOL, we can't afford a single day without sunshine under this bailout. We are royally screwed for the next 10 years.

-Robert

This assumes the entire 700B and then some is lost, which I don't think is the likeliest of scenarios. I don't think the gov is going to be making money on many of these deals but I suspect only a fraction of the money will actually be lost.

The US still isn't on par with most of europe or asia with regards to its public debt to gdp ratio. While the current situation isn't great the government will still be able to create more debt to get funding should there be a further crisis. Though spending does need to be gotten under control in many ares since this trend can't continue indefinitely.

You may be right, but the calculus of all of this has not been written, and Newton is disinclined to offer help from his angle of repose. Essentially, we are all guessing, no?

I don't think derivatives are worth squat. Many conservative bankers and investors refused to buy those investment vehicles and they are now looking like geniuses.

-Robert

 

[NoStateofMind]

Originally posted by: LegendKiller

Originally posted by: PC Surgeon

Originally posted by: LegendKiller

There will be no "hyperinflation" and this bailout will prove to be a boon for the world.

Quoted for future reference.

I forget why they removed the M3 reports LK, could you be so kind as to remind me? Also explain why those numbers are/aren't needed. Thank you.

Because it doesn't really tell you anything? It's a pretty worthless measurement.

More BS obfuscation because I need to inflict my superior ego over all

Oh really? Meaningless? Nice coming from a self proclaimed economic guru. If M3 reports meant nothing, why keep the tally to begin with? The manufactured scarcity of dollars is hard to prove when there is no paper trail, isn't it LK?

 

[First]

Originally posted by: PC Surgeon

Originally posted by: LegendKiller

Originally posted by: PC Surgeon

Originally posted by: LegendKiller

There will be no "hyperinflation" and this bailout will prove to be a boon for the world.

Quoted for future reference.

I forget why they removed the M3 reports LK, could you be so kind as to remind me? Also explain why those numbers are/aren't needed. Thank you.

Because it doesn't really tell you anything? It's a pretty worthless measurement.

More BS obfuscation because I need to inflict my superior ego over all

Oh really? Meaningless? Nice coming from a self proclaimed economic guru. If M3 reports meant nothing, why keep the tally to begin with? The manufactured scarcity of dollars is hard to prove when there is no paper trail, isn't it LK?

Because there are no significant reasons to keep M3 calculations when the relationship between increased money supply (which M3 didn't measure accurately to begin with) and inflation isn't a perfectly linear relationship.

 

[First]

Btw, gold is currently around roughly $840/ounce, and took it up the rear this past week despite the fact that a $700B MS infusion passed both Houses. http://www.businessweek.com/ap...cialnews/D93ILBSO0.htm

And this is what the Bretton Woods guys don't get. When gold goes absolutely nowhere from this point on in the long-run (as it has the past 25 years), maybe, just maybe, these people who claim increased money supply = increase inflation, will seriously rethink their positions. Debasing currency is not tied to any one factor; i.e. increased money supply is only one part of the entire equation that contributes to inflation. All sorts of other factors, particularly velocity domestically (and abroad when you think about it) have just as much impact on inflationary pressures, if not more.

Ron Paul and Peter Schiff haven't figured this out, or perhaps they have grossly underestimated velocity, and it's why they continue to falsely claim we are debasing currency by the solitary act of increasing money supply. Sorry, but usage/transactions per dollar have a huge impact, and it's why the dollar will never tank to the degree they think it will in an economy like this, and why Schiff will be wrong about the hyperinflation he predicts for 2009 and why he'll be wrong about gold as a long-run portfolio asset. Gold is nothing more than a nice commodity to diversify nonsystematic risk in a portfolio. That is gold's place, and I'd get used to it.

 

[bamacre]

Originally posted by: Evan Lieb
2) He claims that the Federal Reserve, including Bernanke and others, purposefully lie and distort inflation numbers (among other statistics). When asked what Bernanke's motivation would be and why Greenspan, Volcker, and every Fed supervisor and economic advisor split between half a dozen Democrat/Republicans administrations over the last several decades didn't pick up on his conspiracy to trick consumers into using false inflation and economic statistics, Schiff is notably silent and has no explaination. http://www.youtube.com/watch?v=ucDkoqwflF4

What section of time in that clip is relevant to your claim? Did I miss it?

3) Schiff then goes on to make the laughably ridiculous claim that a collapse of the U.S. economy will benefit the rest of the global economy because of the eventual collapse of the U.S. dollar; http://www.youtube.com/watch?v=iR_ssZzQyYQ. No mention that every crash and recession in modern history (81-82, 87, 91-92, 00-01) was followed or simultaneous with a global slowdown.

He didn't specify "simultaneous," not even short run.

Actually, his rationale for this seems like he meant "long run" impact.

4) He is in fact a conspiracy theorist and has been on the Alex Jones show for a while now: http://www.youtube.com/watch?v=H5vGxCCdesM

He's selling a book.

Bottom line, Schiff doesn't understand why inflation is calculated the way it is because, sadly, he's not very well informed on marcoeconomic theory. Which makes some sense considering he was Ron Paul's economic adviser.

And yet both of them are among the few who predicted this current mess we are in.

 

[First]

Originally posted by: bamacre
What section of time in that clip is relevant to your claim? Did I miss it?

Yes, you did. Check around the 8:30 mark.

He didn't specify "simultaneous," not even short run.

Actually, his rationale for this seems like he meant "long run" impact.

Except 25 years is long-run impact, and Schiff's entire theory is based on this nonsensical idea that we've essentially been in some sort of bubble for 25 years. Schiff has been wrong for years and continues to be. He has been predicting a massive recession, complete collapse of the dollar, a massive increase in the price of gold, extraordinarily higher bond rates, etc. for a good 3-4 years and he has been dead wrong. The only people who believe otherwise are, not surprisingly, Paulbots and libertarians.

And yet both of them are among the few who predicted this current mess we are in.

Except they didn't predict anything. They both have talked about how the dollar is going to be debased, and looked like geniuses to the laymens for a short period earlier in the year. Of course now they just look foolish. And as I said above, Schiff has already been wrong on gold prices, the value of the dollar, and will continue to be wrong about bond rates (unless the Fed makes a significant change in monetary policy). In Ron Paul's case, he has been arguing the same things how U.S. currency will be debased without gold and how the Fed needs to be abolished, for nearly 3 decades now.

 

[bamacre]

Originally posted by: Evan Lieb

Originally posted by: bamacre
What section of time in that clip is relevant to your claim? Did I miss it?

Yes, you did. Check around the 8:30 mark.

Nope. He wasn't even asked.

He didn't specify "simultaneous," not even short run.

Actually, his rationale for this seems like he meant "long run" impact.

Except 25 years is long-run impact, and Schiff's entire theory is based on this nonsensical idea that we've essentially been in some sort of bubble for 25 years. Schiff has been wrong for years and continues to be. He has been predicting a massive recession, complete collapse of the dollar, a massive increase in the price of gold, extraordinarily higher bond rates, etc. for a good 3-4 years and he has been dead wrong. The only people who believe otherwise are, not surprisingly, Paulbots and libertarians. [/quote]

I don't have a crystal ball either that tells me if he's right or wrong, but I thought your comment wasn't very applicable.

And yet both of them are among the few who predicted this current mess we are in.

Except they didn't predict anything.

I just don't agree with you here.

In Ron Paul's case, he has been arguing the same things how U.S. currency will be debased without gold and how the Fed needs to be abolished, for nearly 3 decades now.

And the current mess, especially if it is worse than we would like to think, gives his stance a lot of merit.

The interest doesn't seem to be limited to "Paulbots" either...

http://www.google.com/trends?q=Ron+Paul
http://www.google.com/trends?q=Austrian+Economics

 

[First]

Originally posted by: bamacre

Originally posted by: Evan Lieb

Originally posted by: bamacre
What section of time in that clip is relevant to your claim? Did I miss it?

Yes, you did. Check around the 8:30 mark.

Nope. He wasn't even asked.

I cannot help that you didn't catch it and/or understand it. Try the 8:15-8:40 mark, if that helps.

I don't have a crystal ball either that tells me if he's right or wrong, but I thought your comment wasn't very applicable.

I'll repeat it again; his notions are based on the idea that we can't measure inflation, that all of this is fake growth, and that we've been in essentially a massive bubble lasting 25 years because several administrations, economic advisers to those administrations, and Fed Chairmans are apparently too busy covering/masking inflation the last quarter century.

I just don't agree with you here.

You don't have to agree or understand, I'm telling you what the reality is, that's all.

And the current mess, especially if it is worse than we would like to think, gives his stance a lot of merit.

Except if the economy recovers in 2009 or 2010, and then we have another several years of solid growth like we did between 02 and 06/07, Paul will be wrong yet again as he has been the prior 3 decades. What I don't think you understand is that Paul has already been wrong, for a really long time. But I think Paul knows that and it's why he truly believes that the wonderful growth in standards of living and economic power/stability we've seen is all just a temporary bubble. But the facts and stats don't back it up. You don't see many (any?) PhD economists or econometricians talking up Ron Paul, Peter Schiff or Austrian economics. It's a dead-end research-wise.

Bottom line, for Paul to be right about the economy, gold would have to shoot off the charts, the dollar would have to eventually fall to next to nothing, and bond rates would have to go back up well above double digits on 30 year yields. If you truly believe any of that garbage, then you should short the currency right now. But if you can't put your money where your mouth is, then it's pointless to try and claim you "know" there's a crash coming. You just don't, economics isn't predictable in an exact way. What is predictable is that Paul might even be right about some things, but he could be 100% right for the absolute wrong reasons. Just because I believe dancing around a fire in late December might bring snow in the mountains, doesn't mean I am proven right when snow starts falling the next day.

The interest doesn't seem to be limited to "Paulbots" either...

http://www.google.com/trends?q=Ron+Paul
http://www.google.com/trends?q=Austrian+Economics

I'm sorry, but what does this prove exactly?

 

[Coldkilla]

Originally posted by: bamacre
The bailout simply cannot be a disaster. Obama fully supported it, and voted for it. So, it is impossible that it was a bad decision.

eh? McCain's "absolute no pork allowed" policy? And votes for it anyway?

 

[ericlp]

well, it will be interesting 'Monday' to see what the market does. I think it will rally. That may be a good time to get out.

Just a little tip for everyone here.

 

[JEDIYoda]

Originally posted by: Dissipate

Originally posted by: Moonbeam
There must be a whole cadre of crack pot Libertarians we can circle jerk to.

Wow, good job, you just refuted everything I posted. :roll:

The Federal Government has suspended the laws of economics and we can all go back to business as usual.

Truth be told he did just refute what you posted!
No substance is easy to refute!!

 

[SleepWalkerX]

Originally posted by: ericlp
well, it will be interesting 'Monday' to see what the market does. I think it will rally. That may be a good time to get out.

Just a little tip for everyone here.

Who knows? I'd like to see what happens on Monday. But so far its been an epic fail

 

[jackace]

What's going to happen if the bail-out stabilizes things for a short time and all these large investors see the screwed up economy (job numbers down, retail sales down, energy prices going up, etc) and just take their money out and put it in something else?

Edit- Something else being more secure and much less risk and exposure to our crappy economy.

 

[GodlessAstronomer]

Originally posted by: SleepWalkerX

Originally posted by: ericlp
well, it will be interesting 'Monday' to see what the market does. I think it will rally. That may be a good time to get out.

Just a little tip for everyone here.

Who knows? I'd like to see what happens on Monday. But so far its been an epic fail

Someone doesn't know what the term "trend" means. Pro tip: you can't measure a trend over 3 hours.

 

[Craig234]

Independant economists have strongly attacked the bailout plan and suggested alternative plans the Congress did not consider.

I have not seen any of the Wall Street posters here who have so strongly defended thae bailout, answer why those alternatives are not a better choice.

They have only made the case for doing *something*. As far as we can tell, the Congress did the corrupt plan and not the better alternatives. I'd like to see them address that more.

 

[First]

Originally posted by: Craig234
Independant economists have strongly attacked the bailout plan and suggested alternative plans the Congress did not consider.

I have not seen any of the Wall Street posters here who have so strongly defended thae bailout, answer why those alternatives are not a better choice.

They have only made the case for doing *something*. As far as we can tell, the Congress did the corrupt plan and not the better alternatives. I'd like to see them address that more.

You'd have to be more specific. From what I've read on the bailout, the corrupt part was merely the pork additions (all $110B), which is standard practice (and sadly, practical) in U.S. politics these days.

 

[ch33kym0use]

They won't really fix the problem under Bushco. Because the underlying problems have not been addressed. It is the policies that are wrong. Part of the problem is bailing companies out. Another part was the removal of restrictions on what banks could do to lend. It was your leaders, in the banks and government. They made the wrong decisions. They didn't listen to the better alternatives. They only listened and addressed the alternatives of the banks. It was until the house got involved when the bill was changed to become more suitable for them and more people in America, however it has pork barrell spending and that was because the people that voted "nay" were influenced by the pork and by an improved bill. However this bill will not change much. A fundamental shift or change in policies must occur. Totally new and different leaders that will prevent this type of waste from occurring.