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Joseph Stiglitz: Freefall

Commonwealth Club
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Gnarlodious Avatar
Gnarlodious
Posts: 8
Posted: 03.03.10, 07:48 AM
He should replace Geitner.
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mcnamara Avatar
mcnamara
Posts: 1
Posted: 03.03.10, 09:49 AM
Unfortunately he already got thrown out of the World Bank for his independent thinking. Can't see the Fed taking him on board.
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adambl Avatar
adambl +
Posts: 36
Posted: 03.03.10, 11:52 AM
I wonder if free markets would work if we did have perfect competition and perfect information. I mean, perfect competition would lead to fair market prices, and perfect information would ensure people didn't take out unreasonable mortgages. Seems pretty sound to me.
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Sokratez Avatar
Sokratez
Posts: 13
Posted: 03.03.10, 07:44 PM
Quote:
Originally Posted by adambl
I wonder if free markets would work if we did have perfect competition and perfect information. I mean, perfect competition would lead to fair market prices, and perfect information would ensure people didn't take out unreasonable mortgages. Seems pretty sound to me.
We depend on nature, so unless rain decides to go where prices for water are high, i doubt it. Your idea of "perfect information" would imply, that farmers can plan their future, because they already know how much rain there will be next year. The free market, like anything else we humans do, always has to react to reality. Capitalism will always go where the profits are, and it will serve the people only *if they can pay for it*. In nature things work very differently. You simply cannot buy rain.

Sure, if you imagine that the system is perfect, then you can conclude that it works. That's a dirty little trick to confuse yourself.

I wonder, if we'd live in a perfect world where everyone takes care of everyone else, where nothing belongs to anyone, because there is always enough to go around for everyone, i wonder if socialism would work in a world like that...

See what I mean?
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phiscal Avatar
phiscal
Posts: 52
Posted: 03.03.10, 07:55 PM
Stiglitz is evidence for the theory that the American left and right are symmetrical. Stiglitz is the left's Ron Paul...outspoken, entertaining, but playing with a deck that's a few cards short.

Wall St certainly should shoulder blame, but it is intellectually negligent to stop there. Everybody partied during the boom: realtors, Fannie and Freddie, the construction industry, the UAW, Wall Street, Main Street, presidents and Congresses, borrowers and lenders, rich and poor.

Markets are to blame, but not free markets. Government intervention (which is often positive) played a large role in feeding the frenzy. Too Big To Fail and FDIC insurance made it rational for market participants (including first time homebuyers) to bet on the upside and discount the downside.

Fannie and Freddie, stepchildren of very deliberate federal market intervention, grew to own and guarantee $5 trillion in mortgages against the advice of politicians and financial leaders Stiglitz undoubtedly disagrees of.

Deregulation played virtually no role in the lead up to the collapse. The firms at the center were not deposit-taking institutions that would have been subject to Glass Steagall had it been in effect.

The boom and bust is not without its positives. First, we went 25 years without a serious recession - five times longer than normal. So is it a surprise that when it finally hits, it hits hard?

Further the boom pulled hundreds of millions of the world's poorest citizens out of poverty. Witness China. Hopefully they can hang on to their newfound wealth.

In this presentation, Stiglitz is certainly not a seeker of truth, but a colorful partisan advocate.
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balthazarF Avatar
balthazarF
Posts: 70
Posted: 03.04.10, 02:31 PM
THE COWS ARE GONE. QUICK! CLOSE THE BARN DOOR.

Imperfect Information for a More Imperfect Nation

Economic theory is not mentioned in the Constitution. America is ruled by the Law of the Land.

The Law of the Land begins with a statement of responsibility and purpose.

Responsibility lies with We The People, not We the economists, We the corporations, We the business people, nor We the special interest.

We the people established a constitutionally democratic republic.

In its very structure, capitalism (the economic in vogue) is anti-democratic.

In its very structure, the corporation is undemocratic.

Businesses with employees, in their structure, are undemocratic.

Capitalism has one requirement, capital; one goal, more capital.

We the people have the responsibility and constitutional authority to regulate all parts of the national economic, all businesses, to preserve the constitutionally democratic republic.

Business does not have a constitutional entitlement. Capital, which is fungible, does not have a national allegiance.

We the people are fully responsible for the condition of the nation.

To have more perfect information to ensure that more perfect nation and the condition we have put it in today, we the people have a responsibility to be informed about the legal structure of corporations at the time the Constitution was adopted. Of course, the task is not easy, is necessary and there were just thirteen states with corporate law to be understood. Also a citizen should be informed about the central bank and when and how it came into being in relation to the Constitution.

Want to solve entitlements? Eliminate the existing legislated wage of poverty. Require a living wage and then some with which to engage in capitalism as a capitalist, not a debtor. And create government jobs where capitalism cannot.

Seven million plus workers in this country have not lost their jobs. One cannot lose something one does not own.

Want to solve health insurance issues so everyone is covered? Can you say NATIONAL NOT FOR PROFIT INSURANCE MONOLOPY UNDER STRICT REGULATORY OVERSIGHT? I know I can.

Corporate officers, under SCOTUS authority, have a fiduciary responsibility to their stock holders. In a for profit insurance corporation the insured is forced to live with that responsibility and subordinate any fiduciary interest to that ruling. CLAIM DENIED.

We the people are responsible for the condition the nation is in today.

After Reagan bailed out the banks, we were told by THE TWO PARTIES THAT WE THE PEOPLE RE-ELECT IN SPITE OF THEIR RECORD that they had taken care of the problems in banking, changed the law, and that that would never happen again. Of course, those TWO PARTIES had already changed the laws regulating the banks following the last time the capitalism went into failure mode. And after TWO PARTIES last promise they allowed a consolidation of banking, brokerage and insurance which is now in failure.

Can you say systemic? I can.

We the people are responsible for the condition the nation is in today.

Remember, a lot of Americans do not want to admit that we have become so stupid, or perhaps were never that bright. Instead of becoming informed, we'll be Einsteinian, We the people will continue voting TWO PARTIES and expecting change. I'm confident of that.

We the people are responsible for the condition the nation is in today.
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cat1012000 Avatar
cat1012000
Posts: 1
Posted: 03.04.10, 04:39 PM
The teaparty does not advocate "No government" we want limited government. The fact that government pre-empted "Bucket Laws" that had protected the market from abuses in unconscionable. Derivatives, credit swaps & ETFs are crazy and unless stopped will continue to fuel further market abuses. In fact, George Soros is using ETFs to "bet" against Greece. You see how well that is going.

By the way, I've created/invented/produced many services and products across several industries & never took a dime from the government - so your statement that we need "government" to fund research & new products is greatly flawed. Do you work in the academia world? Certainly sounds like it.

What is more flawed is Public-Private partnerships. Where the taxpayer money pays for all the research and a private company gets all the profits - now that is a flawed system.
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TreeLuvBurdpu Avatar
TreeLuvBurdpu
Posts: 28
Posted: 03.04.10, 11:30 PM
Stiglitz is misinformed. For one thing the government did not create the internet. Many private companies worked on it. At the time, the two biggest players, AT&T and IBM, were prevented from inter-netting by regulations. IBM was forbidden from operating telcom lines and AT&T was prevented from offering computing services.

What most people refer to when they are talking about the internet is the World Wide Web. At first the government didn't even know that the Web had been created. When they found out it was already creating so much wealth and commerce that they didn't even want to touch it. They didn't even tax it. There is no way the early web could have progressed so quickly and overcome so many technical problems if the government was watching over their shoulders. It is a glowing example of self governance, unless you listen to Stiglitz.

A better example would be if he reached into his pocket. Within reach of everyone in that room is their cell phone. Cell phones were not created and developed by government mandate. They were made for the pleasure of rich people. Rich, noisy lawyers who pranced around with them in libraries and cafes. Then they trickled down to us. Cool.

He is also wrong on free markets. He says that banks are reckless. Are they more reckless with their own money than the government is with ours? A company I worked for made reckless loans. Why? Because right after we created the loan the government would buy it from us. They were called conforming loans. I remember the CFO telling me that no banker would make these kinds of loans, but the government would underwrite them.

The biggest problem with economic stimulus is not that they are hugely expensive, it's that they don't work. And because it doesn't work the government does it again. Everyone will pick through the many ways the stimulus was badly implemented, but they never consider that the problem is that it was implemented. It creates only an economy of scavengers.

In the three hundred years that markets have been at least partly free they have taken us from subsistence living and indentured servitude to global telecommunications, travel at faster than 15 miles an hour, space-flight, and digital cameras.

Stiglitz would very literally prefer feudalism and serfdom. He sees the markets as only something to help the government run the economy, instead of the thing that created the economy that allows us to afford a government.
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TreeLuvBurdpu Avatar
TreeLuvBurdpu
Posts: 28
Posted: 03.04.10, 11:46 PM
Quote:
Originally Posted by adambl
I wonder if free markets would work if we did have perfect competition and perfect information.
It is with imperfect information where free markets shine. He forgot to mention that the government also has a treasure trove of imperfect information.

Every accusation I have heard leveled against free markets (people making purchase decisions by the use of their very own mind) applies doubly to the government. Inefficient? Yes. Prone to error? Yes. Vulnerable to undue influence and populist hysteria? Yes.

But worst of all, the government can enforce it's flaws with guns. You wanna change brands? Talk to the sheriff.
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sp1ke0kill3r Avatar
sp1ke0kill3r
Posts: 3
Posted: 03.06.10, 04:41 AM
Where to begin?

Stiglitz is Paul Krugman on steroids

Tax cuts didn't work because people saved the money. You need to spend money to stimulate. And by the way, banks need to loan more money.
And where do banks get the money to lend????? If you said from people who put their money in the bank(uh saving it that is). Pass Go and collect $200.00
In short, the more people save the more money banks are able to loan. That's kinda the banks reason for being. Thus it's not spening that stimulates, but increasing the velocity of money.

Stiglitz tells us this is a failure of the private sector, then spends the rest of the time explaining the extent of the governments failure.
He mentions how the only nongovernment person in on the AIG negotitiations was the head of Goldman Sachs.
Of course, the government officials were the victims of silly academics who told everyone wall street knows best: I doubt you can find any free market economist who would make such a cornball statement. Wall street doesn't know better than anyone else; the difference is that wallstreet functions within certain constraints: Mainly profit and Loss. Remove said constraints by, oh say... artificially keeping the cost of borrowing money very low(cheap money or low interest rates) and Wall Street will behave
accordingly. Yet what player is big enough to remove those constraints for Wall Street as a whole?
If you said the Federal Government in the form of the Fed, pass Go and collect $200.00!
Stiglitz tells us how banks hid their losses so well, they even hid them from themselves. Ya gotta love stories about a bunch of rubes who outsmart themselves. It can't get any better than that! So we'll continue with economists who hide the governments role in starting this whole chain of events so well that they even hide it from themselves.
Ok let's go to the video tape: If you've heard of the Community Reinvestment Act (http://en.wikipedia.org/wiki/Community_Reinvestment_Act)
you don't need to finish the class: Pass Go and collect $200.00
The law was passed to fix a problem the government created when it decided to
push home ownership: Redlining introduced by the National Housing Act of 1934.
But let's get right to the objections mentioned by the article in Wikipedia. "the FDIC, Chair Sheila Bair, FDIC Chair, Sheila Bair, delivered remarks noting that the majority of subprime loans originated from lenders not regulated by the CRA, calling it a "scapegoat" and declaring it "NOT guilty."
But the question isn't about where loans originated or whether these lenders were regulated by the CRA. The question is whether financial institutions purchasing these loans, in the form of securitized mortgages, were regualted by the CRA and whether such purchases were influenced by
CRA ratings. That is if a bank wished to expand and believed that approval by regulators hinged on their CRA rating, they might have a powerful incentive to make such purchases. In this context, it's interesting that
former Fannie Mae CEO Franklin Raines "said it might have been a catalyst encouraging bad behavior, but it was difficult to know."
Likewise, Bob McTeer, president of the Dallas Federal Reserve Bank from 1991 to 2004, said “There was a lot of pressure from Congress and generally everywhere to make homeownership affordable for poor and low-income people. Some mortgages were made that would not have ordinarily been made.” He also said “When a bank made a decision to purchase mortgaged-backed securities, they would somehow determine if some of them were in zip codes covered by the CRA, and therefore they could get CRA credit."

Yea Joe definitely a private sector failure! Also ya might want to go back to school to learn the definition of the Invisible Hand. It's certainly not
anything like your oversimplification. Hayek referred to it as an unsurveyable pattern. One might say that greed does lead to the most
public good provided it's constrained by a competitive environment.
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