Karl,
Why doesn't your plan address financial bailouts? Will we continue to have the Fed or Fannie and Freddie's buy up toxic assets and then fund their losses? What happens if (ok, when) European peripherals go under and we have big institutions facing losses that threaten solvency from credit fault swaps with insufficient reserves. Would taxpayers have to bail out GS? I don't hear anybody addressing any of this, and this is what worries ME. Not Social Security or food stamps, or even Medicare, which will present a major problem further down the line. I think we need to address, and SOLVE, the short term issues, then move on to long term ones. If we don't make it five years, Medicare becomes a moot point, and worrying about insolvency of SS in 2036 is a farce considering the size of the current problems we have to deal with and the amount of uncertainty we face over the next 10 years.


First things first.

The second question I have is about the effect of austerity measures such as being proposed and why they would work. Do we have a successful example to draw off of. I can't help but look at Ireland who has gone this route and see how their economy has tanked in response. Why would we be different? To me, it looks like we are choosing to go the same route as they did.

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Karl,
Why doesn't your plan address financial bailouts?

Because without any money to pay for them, they won't happen.

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Will we continue to have the Fed or Fannie and Freddie's buy up toxic assets and then fund their losses?

No. Read the Fannie face page of the prospectus. You're entitled to zero.

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What happens if (ok, when) European peripherals go under and we have big institutions facing losses that threaten solvency from credit fault swaps with insufficient reserves. Would taxpayers have to bail out GS? I don't hear anybody addressing any of this, and this is what worries ME.

How many times do I have to address all of this?

Because all of it has been addressed.

Why can't we just all let the chips fall. Pay off all the bets (cds) that can be paid off, close down insolvent institutions, bankrupt everyone that has to go bankrupt and start over. I don't give a **** if unemployment goes to 25% lets get it on. You'll be amazed how fast things recover.

And by the way while we're defaulting everything we better put some trade policies into effect which will promote Americans buying American made goods and an energy policy in place which brings us closer to energy independence.

'We' won't let the chips fall because the billionaires might lose a penny.

Fraid so Mo.

Those are not chips, they're pianos, and they're headed southbound.

And there won't be American made products when we have "free trade" policies that encourage companies to use the cheap slave labor of countries like Columbia where labor activists who try to negotiate improved work conditions are summarily assassinated, and our big money can go to Panamanian banks which proudly claims will take illegal money and launder it or harbor it from taxation.

Tristan,

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The '20s were a period of rampant speculation. Debt-to-GDP went from 160% to 300% in those ten years. It was not exactly real prosperity.

That's certainly true and I don't dispute that. The 20s was a boom, and one that overheated and went Ponzi, leading to the Great Depression. But that period was where essentially we went from the agrarian society we were in the 19th century to the modern one we are no. That was where electrification, appliances, power tools, and all the modern trappings first became available, at least in the cities.

Debt data from that period is hard to come by apparently as the modern economic metrics weren't even concieved of yet, I don't think.

There is this chart, from Morgan Stanley that I got somewhere and saved. According to that, we didn't reach the peak of 300% debt to GDP until around 1933 or so, the bottom of the Depression. I don't whether that final rise from 200% to 300% was due to more debt still being taken on, or just GDP collapsing before the debt start being destroyed.

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There is this chart, from Morgan Stanley that I got somewhere and saved. According to that, we didn't reach the peak of 300% debt to GDP until around 1933 or so, the bottom of the Depression. I don't whether that final rise from 200% to 300% was due to more debt still being taken on, or just GDP collapsing before the debt start being destroyed.

Excellent assumption, Publius. You are right. GDP fell by almost half between 1929 and 1933. Here are figures in $billions.[/[/[/[/

1915	38.7	3.06
1916	49.638	3.61
1917	59.702	5.72
1918	75.835	14.59
1919	78.333	27.39
1920	88.4	25.95
1921	73.603	23.98
1922	73.432	22.96
1923	85.4	22.35
1924	86.947	21.25
1925	90.6	20.52
1926	96.9	19.64
1927	95.544	18.51
1928	97.4	17.60
1929	103.6	16.93
1930	91.2	16.19
1931	76.5	16.80
1932	58.7	19.49
1933	56.4	22.54
1934	66	27.05
1935	73.3	28.70
1936	83.8	33.78
1937	91.9	36.42
1938	86.1	37.16
1939	92.2	40.44
1940	101.4	50.70
1941	126.7	57.53
1942	161.9	79.20
1943	198.6	142.65
1944	219.8	204.08
1945	223	260.12

Above is a table of GDP info. The first number is the year, the second column is the GDP reported, the third number is public debt (no info available here for total debt) and represents "actual reported data".

I love this site, it lets you play around with all kinds of charts and figures. They have data going back to 1792. I'm not sure exactly where it all comes from but some comes from US Census reports that date back to the 1790's.
http://www.usgovernmentspending.com

Good chart, Pub, I forgot about that one. Here is another one that goes back to 1870:



No doubt, rampant speculation is great for innovation--sure worked for the Internet this time around--but the leverage makes sure it goes out with a bang.

I guess my point was that choking down the recession in '21 was the right thing to do to get the economy healthy again, but the "roar" of the '20s would be more the result of leverage and speculation than sound monetary policy. Sound policy just ended the prior bust quickly, getting the ball moving again.

But that's not shown by the graph. Look at 1910-1929, it's a move between 150 and 190% over 20 years.

The issue is 1980 to 2000, that was 160% to 270%, 110% in 20 years.

Karls gonna go over it again?! Ah geez.

Mrbill wrote..

But that's not shown by the graph. Look at 1910-1929, it's a move between 150 and 190% over 20 years.

It looks like 190% is all the economy could handle at the time before blowing up. The same was almost true in the '80s, but the sausage wranglers learned a trick or two to hold it off and then managed to cram another one in there, to boot. It's still a decent parallel.

There's so much crap going down at once in the nation that I have no idea how Karl's going to keep it all straight. He's going to have callouses 2 inches thick on all his typing fingers. We're getting hit from all sides. Lately I feel like I've been repeatedly*****ed on and missed, **** on and hit. Every morning I wake up to another new horror story in the news. When the bezzle moves this fast they easily can sneak one past us and we won't find out about it until all the damage is done.

God bless ya, Karl. I have no idea how you do it, boss. Your head must be buzzin' like a damn $6 chinese electric razor.

They threw the ****ing thing in my bathtub with me in it.