GON Economics lessons are a joke

Miguel Cervantes

GON Severe Weatherman
By the time you hit 30 usually reality has set in and you get squared away, even if you were the stupid kid in high school.
Like I said, even a few. Membership here over the years has proven that one to be true. :bounce:
 
All Progressives are Communist, even the stupid ones who don't even know it.
My mind boggles at the numbers of useful idiots. I just can't wrap my mind around that number. I guess it's my personal problem. In 1969 there just weren't that many of them and everybody made fun of the ones there were.

What a difference a day makes.:rolleyes:

We now pause for this musical interlude brought to you by our ordinate sponsors. I do enjoy 50's torch songs. Love me some Dinah Washington.

 

Miguel Cervantes

GON Severe Weatherman
By the time you hit 30 usually reality has set in and you get squared away, even if you were the stupid kid in high school.
I wasn't the stupid kid in high school, but it wasn't for lack of trying. :bounce:
 
The 1929 crash was a result of over speculation in the stock market with every Joe on the street thinking all he needed to do was throw money at the market and he’d get rich. As a result, the average Joe went to the bank and leveraged everything he could to buy as much stock as he could. The problem began when banks began to run out of money, they “panicked” and began to call in their loans; because so many people were not in a position to pay back loans, they tried to sell their stocks to get some money back. As stocks began to be sold the value of stocks dropped like a rock, suddenly everyone began to sell. However, people were only getting pennies on the dollar for their stocks. People also went to the banks at the same time to take their money out because they too needed some liquidity only banks did not have enough “cash on hand” so they closed their doors one by one and we had the “run on banks.” This all happened in a matter of hours. This was also not the first and not the worst run on banks in American history.

The 08-09 melt-down was similar only with real-estate, except this crash was manufactured by the banks, which, is why banks packaged all their toxic loans into “consolidated debt obligations” (CDO’s) rated them as AAA, and AGI, insured them as such making the sale to other nations around the world a piece of cake. Unfortunately, Iceland was a huge buyer of these CDO’s and got hung out to dry as did all of the other nations who bought them. Obviously, this is a condensed explanation.

That said, there are a number of major differences between 1929 & 08-09. One is we are no longer on the gold standard; we have a floating currency today. Two, the FED is not as stupid, (their still stupid) just not as stupid and would know what to do today, whereas in 1929 they did not. Three, Because of the Brent-wood accord of 1946, among other things, nations around the world began to peg their currency to the U.S. dollar to stabilize their paper money. Four, we made the U.S. dollar the new international currency of trade. Five, all OPIC trading as a result is now done in U.S. dollars. Six, because of this (in theory) the U.S. dollar cannot fail. This is why in the 08-09 meltdown we had nations all around the would throwing money at us hand over fist because if we go down, they go down i.e. we all go down into the largest global depression the world has ever seen.

Can this happen??? YES, it can!!! Read about economic bubbles and how they are created and how they burst. If you don’t understand it ask me and I will write about it.
 
Based upon the principals of Macro Economics I learned in college compared to real world events. The central banks of the industrialized world have the ability to manipulate, along with the influence of the wealth holders of the world to bring calm in an economic down turn. Which makes the basic principles of economics obsolete.
Central banks have always had that power. In general they work a bit to prevent a bubble and generally wind up making it worse when it does come and it will come as they has never prevented a bubble from bursting in the history of central banks but they has made quite a few worse then they would have been had they kept they mitts off.
 
Economic bubbles are created by an overabundance of wealth, (wealth being cash, credit or commodity). When an economic bubble is growing it is always seen as a good thing (even if it is not) because people at the top are making lots of money. However, that only lasts for so long, until suddenly people start to notice the overabundance; sadly by then it is too late.

Let me describe it another way. In manufacturing (I’ve worked in high tech manufacturing my whole life) when a new product comes out companies want to mass produce as much of said product as quickly as they can so they can make lots of money... That’s a good thing... right??? Kind of, often times what ends up happening is companies over higher people so they can make as much money as fast as they can. Additionally they over purchase supplies, materials sometimes even factory floor space. Then market saturation happens, or something new or different hits the market. It can be any one, or all of these things happening. Boom, consumers stop consuming and pop goes the weasel, your bubble just popped. You now have to lay off excess employees; you have to sell off excess supplies for pennies on the dollar, company stock prices drop the company takes a hit, sometimes just flat go out of business and stagnation hits, which can quickly turn into recession and depression. Again, this is an over simplification, but you get the picture.

The U.S. economy is much the same way in that the same thing can happen if growth is not properly managed. Sadly most Americans do not know what a stable annual growth of GDP is (2-3%). When you exceed this for extended periods of time you begin to start growing a bubble. This bubble can grow for a number of years before it pops. Also, in any modern economy there are a number of additional factors which can lead to a greater impact of the boom when it hits. Likewise there are also things that nations can do to mitigate some of the impact of the boom when it does hit. Economies just like in manufacturing all have cycles of high times and low times. However, in manufacturing we have such things as level loading and expediential smoothing so you can better manage growth. Unfortunately, our safe guards for managing the U.S. economy are politicians, (thus sayeth the great John Maynard Keynes) and the watch dogs of the politicians are, “We the People” but if the people do not know... Then they do not know what to watch for, and they don’t know good from bad. And it is always the people, the average and the middle class that pay the biggest price because they are the ones who always get hit the hardest.
 

jimbo4116

Retired Moderator
Re-edjumicate me. What was the underlying cause of the 1929 Crash and ensuing massive economic depression? And what was the underlying cause of the so called "great Recession" and the ensuing mild dip in GDP?
 
The 1929 crash was a result of over speculation in the stock market with every Joe on the street thinking all he needed to do was throw money at the market and he’d get rich. As a result, the average Joe went to the bank and leveraged everything he could to buy as much stock as he could. The problem began when banks began to run out of money, they “panicked” and began to call in their loans; because so many people were not in a position to pay back loans, they tried to sell their stocks to get some money back. As stocks began to be sold the value of stocks dropped like a rock, suddenly everyone began to sell. However, people were only getting pennies on the dollar for their stocks. People also went to the banks at the same time to take their money out because they too needed some liquidity only banks did not have enough “cash on hand” so they closed their doors one by one and we had the “run on banks.” This all happened in a matter of hours. This was also not the first and not the worst run on banks in American history.
Moderately accurate. There is debate if the fact that so much of the stocks being sold were substantiated junk paper wasn't the major cause. The market wasn't regulated then and any Tom, Dick and Harry who could pay the listing fee could list their stocks to be sold.

The 08-09 melt-down was similar only with real-estate, except this crash was manufactured by the banks, which, is why banks packaged all their toxic loans into “consolidated debt obligations” (CDO’s) rated them as AAA, and AGI, insured them as such making the sale to other nations around the world a piece of cake. Unfortunately, Iceland was a huge buyer of these CDO’s and got hung out to dry as did all of the other nations who bought them. Obviously, this is a condensed explanation.
Nope, the crash was caused by the federal government insisting that banks lend money to people who had no ability to repay. That left the banks with paper to unload, which the did. The dumb thing is that they turned around and purchased the worthless paper. Bottom line those was that the government created an artificial bubble.


That said, there are a number of major differences between 1929 & 08-09. One is we are no longer on the gold standard; we have a floating currency today. Two, the FED is not as stupid, (their still stupid) just not as stupid and would know what to do today, whereas in 1929 they did not. Three, Because of the Brent-wood accord of 1946, among other things, nations around the world began to peg their currency to the U.S. dollar to stabilize their paper money. Four, we made the U.S. dollar the new international currency of trade. Five, all OPIC trading as a result is now done in U.S. dollars. Six, because of this (in theory) the U.S. dollar cannot fail. This is why in the 08-09 meltdown we had nations all around the would throwing money at us hand over fist because if we go down, they go down i.e. we all go down into the largest global depression the world has ever seen.

Can this happen??? YES, it can!!! Read about economic bubbles and how they are created and how they burst. If you don’t understand it ask me and I will write about it.
There are virtually no similarities between the two crashed other than a down market. Oh and thanks, but I've read about and studied bubbles.
 
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