Showing posts with label Free Market. Show all posts
Showing posts with label Free Market. Show all posts

22.4.09

no offense taken - 22/10/08

From Buck on October 22nd, 2008

No worries, no offense taken. I already knew your thoughts on those particular issues which you mentioned and, in terms of American hypocrisy and nuclear weapons positions, to pretty much all of it I agree. The real point of the article though is inexperience going into negotiations. I'll respond point by point.

1) About the anti-American propaganda: I got the impression that it was meant more as Krushschev more personally engaging in the anti-American propaganda, which would indicate him as being a difficult figure to negotiate with (which proved to be true). Also, you're right to point out that both countries engaged in the negative propaganda, which would mean that Khrushchev shouldn't have engaged in direct negotiations either... unless he felt that he was more experienced and could probably out match the other. It's dangerous and possibly detrimental to engage in negotiations at such a high level with someone who clearly and publicly has a very negative perception of you and your country. The advice that he was getting suggests a more gradual strategy, to improve relations from the bottom up before engaging in such high level meetings.

2) I totally agree about the hypocrisy of American foreign policy. It's something that I occasionally feel disappointed in my country over and I can put forward no defense of substance. I see that much is done to advance U.S. economic interests which helps American businesses and the American people. But as a believer in the free market, I believe that we should compete for our economic dominance, for example giving better economic incentives to trade with a latin american country for coffee... rather than use the C.I.A. to incite a revolt in favor of a U.S. friendly government. In the long run, I think this would help U.S. international business as it gives less of a platform for anti-american governments to run on (like many democrats strategies being something along the lines of "well hey, it doesn't really matter what I propose, it couldn't be worse than Bush...") like Chavez for example. Anyway, the main point I get from that quote is not "the hypocrisy of American foreign policy" but "Khrushchev lectured him" because when you go into negotiations you can't get pushed around or "get the hell beat out of" you. Because then it becomes a show of dominance rather than a negotiation. And as the following events showed, poorly held negotiations can result in the furthering and increasing of problems rather than at the very least a stalemate. The lecturing probably would not have occurred in negotiations at a lower level, or at least could not have been used as such powerful leverage because the pushing around of a low level diplomat has a much smaller impact than of those negotations held at the highest level. Kennedy should not have allowed it to become a lecture but rather a back and forth dialogue. There were plenty of things to bring up about Soviet Union hypocrisy, human rights violations, etc... To be the leader of a country and be lectured by someone else (from another country) on your own nations policies has a very demeaning effect.

3) Like I said, I totally agree with you on the hypocrisy of U.S. foreign and nuclear weapon policy. It's a really sad situation and ultimately self-defeating. But the point of this is that this was a negotiation that turned into not only a lecture but a "beating." This goes back to the problem that I said a while back about situations with arms races is that it's a game of chicken where you don't want to stop because you don't know if the other will stop too. For Kennedy to be negotiating, propositions have to at least be put forward and discussed, propositions where, presumably, both sides will have to make sacrifices. Simultaneously, the leaders respectively have to show clout in that if conditions are not met by one side, there will be repercussions. If the negotiator is not only unable to give off that impression but is even unable to put him/herself in a position to give off that impression then there are serious problems. As Kennedy admitted, "I’ve got a terrible problem if he thinks I’m inexperienced and have no guts. Until we remove those ideas we won’t get anywhere with him.” Thus you lose any opportunity to engage in negotiations because 1) the person who is doing the beating will sense a gaining of momentum and will not want to give that up as the situation could prove as vital in gaining ground even for positioning in future negotiations since in this game of chicken, since you can't be sure the other side will slow down if you slow down you need to take advantage of any opportunity to get ahead and 2) because perceived influence in enforcing agreements declines so why not try and win the arms race by out-gunning the other if it seems like you can. That's what the U.S. eventually did, and even though in terms of the world it's not preferable, we did end up as the only superpower. So the way I see it is it's a game of a chicken and without very skillful, delicate, and gradual negotiation will any side back down. I don't know a great deal about the Cold War, but at this time, there were no satellite states. They were recent results of the collapse of the Soviet Union when they broke off. I don't think there were any missile bases as close to Russia as Cuba, but I don't really know too much so if you have some information on that, feel free. Also, the Cuban missile crisis is pretty widely believed to have been the closest to an all out nuclear war between the two superpowers. It was a situation very similar to in Watchman, a sort of first strike scenario, where the U.S. thinks the Russians could fire so we should fire first and vice versa. The point the article was making is that this was almost a direct result of the disaster of a negotiation session, not so much: well it doesn't matter if we have nuclear weapons or not but you're not allowed. Poor negotiating can lead to things coming to a head much more quickly rather than improving things or a continuation of a stalemate. It would be a totally different article to focus on the rights of nations to have nukes, thus the author wouldn't want to focus on that. I actually didn't get much of an impression that the author favored one side or the other. It seemed pretty unbiased in describing the lack of judgement in rushing into high-level negotiations.

4) True, the rivalry between the U.S. and the U.S.S.R. and the U.S. and extremist Islam is different, but in terms of duration not so much. You can date this back to the 70's under Carter who had to deal with the holding hostage of the U.S. embassy in Iran. Then, closer to the present, you have the three bombings previous to 9-11 by Al-Qaeda: the U.S.S. Cole, the embassy in Kenya, and the truck bombing of the world trade center in the early 90's. So this is a very long term situation. Iran, Pakistan, Al Qaeda, etc... may not have the all out fire power that the Soviets had and that does change the nature of the conflict. There won't be the kind of Cold War style stand off but that doesn't mean there aren't serious threats. The difference between the two situations, though it does present different kinds of threats and may require different strategies, doesn't change the nature of the argument that rushing into high level negotiations, being relatively inexperienced, couldn't result in a worsening of the situation rather than an improvement. If Obama proves himself as impotent as it seems Kennedy did, maybe Iran will increase nuclear weapons research, funding anti-american terrorists (whether you like the U.S. or not, a lot of their targets/victims are Iraqis in a strategy to maintain Iraqi instability, and as is clear by the recent negotiations b/w Iraq and the U.S. if there is stability, we are willing to fully withdraw), etc... It's a lesson on being prudent, and that making hasty decisions, whether they are well intentioned or not, can have detrimental effects.

5) Love letters are awesome!

9.4.09

those crazy latin commies - 11/10/08

From Buck on October 11th, 2008

In response to those crazy latin commies ; )

http://article.nationalreview.com/?q=YzZkN2YxMzVlZTBhOTNiMTBlODBhNDlkNGU4NmIwNTY=

And this is from a larger essay on the financial crisis. Gives a bit of an idea of what's at stake with having a far left president and far left congress:

Finally, on top of the survey in uncertainty and collapse in credit we also have the specter of a damaging political response. One of the major factors compounding the Great Depression was that politicians moved to hinder free trade and encourage anti-competitive practices. The infamous Smoot-Hawley Tariff Act of 1930 was introduced by desperate US policymakers as a way of blocking imports to protect domestic jobs, but helped worsen the recession by freezing world trade. At the same time policymakers were encouraging firms to collude to keep prices up and encouraging workers to unionize to protect wages, exacerbating the situation by strangling free markets. The current backlash against capitalism could lead to a repeat, with politicians swinging towards the left away from free-markets. This happened after the Great Depression, it happened after the major recession of 1974/75 and I think it will happen again now. This will lock in the short-run economic damage from the current credit crunch into longer run systematic damage from anti-growth policies.

This is a bit of an old article, but still kind of applies. Scary to think that had Obama been president starting in January 2008 or 2007, there could very likely be the next depression by now (this links into the above quote):


No rush to respond though, just enjoy the weather and the ride and happy (Canadian) thanksgiving!

14.3.09

keating economics - 6/10/08

From Brent on October 6th, 2008

http://www.keatingeconomics.com/??

From Buck on October 7th, 2008

You got to read both sides, and something like this is just pure propaganda. Unfortunately in politics, when you're in the game for a long time, you can sometimes get mixed up in things by mistake. McCain was cleared of involvement in the Keatings scandal and found to have the least involvement whatsoever of the 5 senators involved. Here's a little of what Obama has had his hand in his only short time in politics:

http://www.theaustralian.news.com.au/story/0,25197,23643866-5013948,00.html

The intro to the website you sent says: "The current economic crisis demands that we understand John McCain's attitudes about economic oversight and corporate influence in federal regulation. Nothing illustrates the danger of his approach more clearly than his central role in the savings and loan scandal of the late '80s and early '90s." This implies that McCain was negligent towards oversight and regulation and therefore played a very important role in the current financial crisis.

Check this out:
http://bellalu0.wordpress.com/2008/09/17/bush-and-mccain-proposed-oversight-of-fannie-mae-and-freddie-mac/

and this:
http://corner.nationalreview.com/post/?q=YTBiMjNlZjQzNTM4OGIwMTE3YTU5MjM2ZGVhYzY4NWU=

and then there's this, what he actually said in 2005, 2 years before any of this started (Obama was already in the senate for this, it would be interesting to see which way he voted, I'll look it up when I have more time):

http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190

13.3.09

"Failure to pass bailout threatens all Americans" - 3/10/08

From BUCK on October 3rd, 2008

Begin forwarded message:

Date: October 1, 2008
3:15:00 AM EDT
Subject: "Failure to pass bailout threatens all Americans"
Source: Economist's View
Author: Mark Thoma

Jonah Gelbach:

Failure to pass bailout threatens all Americans, by Jonah B. Gelbach, Arizona Daily
Star: The U.S. House on Monday rejected the Wall Street bailout. This mistake threatens all of us, on Main Street, Speedway, Campbell, Golf Links and Oracle.

I'll make five main points.

First, we got into this situation because ... housing prices rose too high. Banks and
other investors made bets that could pay off only if the market kept rising. Now those bets are underwater.

Second, what if we don't pass a bailout? Our financial sector is caught in a trap. No one's sure which borrowers ...[are] going belly up. Even healthy banks won't lend to other banks.

Usually, when banks can't borrow, they sell off healthy assets. But if everyone sells at once, everyone spirals into free-fall. Since all sectors of our economy depend on credit availability, massive layoffs will occur if this situation lasts much longer. It would take years to recover.

Third, the current bill is a big improvement over Treasury Secretary Henry Paulson's initial legislation. It adds oversight and seeks to limit compensation paid to the Wall Street executives who made bad bets. Most importantly, the new bill limits the bailout's cost by giving us, the taxpayers, a stake in companies that get help. The bill isn't perfect, but it's good enough.

Fourth, many are understandably outraged. After years of billion-dollar compensation for a few would-be whiz kids, financial firms now want help from ordinary working people.

But look at it this way. Imagine your child stands wrongly accused of murder. Along with a co-defendant, she faces execution. You can prove your child's innocence. But if you testify at trial, your child's co-defendant will also go free, even though you know he's guilty. Would you allow your child's execution to convict the guilty guy?

This bailout will help some who have caused the mess, but that's an unavoidable part of helping everyone else. Don't cut off your paycheck to spite a financial executive.

Fifth, this bill isn't nearly as expensive as people seem to think. First, $700 billion is less than some realize. Imagine you run a delivery business that makes $60,000
annually and your van breaks down. It will cost you $3,000 to fix it. Should
you fix the van or close down the business? That's a no-brainer.

It's also similar to the bailout, because $700 billion is 5 percent of our economy's 2007 income, $14 trillion, and we'll lose an awful lot more than $700 billion if we let the economy tank. And we'll lose it repeatedly for several years.

Moreover, we're not just going to hand over the cash. The original Paulson plan would have allowed that, but Monday's bill wouldn't. Taxpayers would get a stake in any gains from future sales of the assets the government will buy. And because the government will wait to sell these assets until financial markets have enough capital to operate healthily, these assets might be sold for more later than now. We're putting up $700 billion now, but we'll get some, all or maybe more back later.

There'll be plenty of time to hand out blame. But let's make sure we do that after banking hours — instead of in the unemployment line.
Financial markets and financial intermediaries bring together people who have an excess supply of loanable funds with those who have an excess demand. But why do those with excess demand want the money? They want it because they believe they can use it to make profit through some business venture.

They wouldn't borrow the money if the expected payoff didn't exceed the cost of the loan.

So financial markets channel money to the real economy, and that is the source of the profits you see on Wall Street (beyond the zero sum game among some traders). Loans are paid back - with interest - from the profits the borrower made with the money. Money doesn't breed, simply taking out a loan from a bank won't make you wealthy, you have to do something productive with that money, that is where you get the profits to cover the loan and interest.

So the ultimate source of profits on Wall Street is the real economy (though occasionally, i.e. when there is a bubble, the profits are based upon false valuations in the real sector). Profits come from people doing productive things with the loans that take out, and those productive things employ people and make the economy grow faster. Wall Street is a conduit to the real economy, it is not an end in and of itself, and when that conduit is not functioning properly - when money stops flowing through financial markets - productive activity is diminished and growth and employment pay the cost.

12.3.09

let the bailouts begin! - 3/10/08

From Brent on October 3rd, 2008

http://www.fool.com/community/pod/2008/080919.htm

From Buck on October 3rd, 2008

Unfortunately there's a misconception that this bailout is only helping out the people that made bad choices at the expense of people who didn't.

Fortunately, that's not true.

The people that did make mistakes are going under, being taken over by the better run companies, and in some cases (as in AIG) the government is taking over the company (at a major loss for CEO's and stock holders). For AIG it's an 80% stake. Also, there's a very good chance that tax payers will actually make a profit from this bailout, as long as the bad assets are bought at market value (and not above).

The 700 billion dollars is a max that may need to be spent. The number was actually picked high enough to induce confidence that this plan would be enough. It may not all be used. A similar plan was actually used in the 80's for a similar crisis they had at that time, and in the end the government and taxpayers (like dlbuffy from the article) made a profit.

The free market is like evolution, it's a survival of the fittest type of system, problems come along and the weakest of the gene pool get weeded out, and at the same time things get changed and fixed to adjust to the new atmosphere and new threats. If this had been the 1930's we'd be in a great depression already but people, companies, and governments have learned their mistakes. There are organizations in place like the FDIC to help make the recession as smooth as possible. A lot of why this stuff happened is there were new financial systems built in the last 80 years, whose risks and benefits weren't quite understood yet. Now they're much better understood and companies and government are changing accordingly, like how I told you that Morgan Stanley and Goldman Sachs applied to be bank holding institutions which means they will be more regulated and won't be able to take as big risks, but have more access to assets. The free market didn't fail, it's working perfectly. We're in the downside of a business cycle, which, though can be painful, hypothetically should allow the bad companies to fail or at least restructure and for the good, strong, innovative companies to retrench and prepare for a more prosperous future. Many of the major companies that exist today actually were started during recessions.