#1
I'm not expecting much of an intelligent response from the Pit, but here it goes.

I have an interview for economics where basically we discuss monetary and fiscal policy (as well as possibly the auto industry/potential bailout issue). I just wanted to hear some people's opinions on what exactly the government should do to get the economy back on its feet using fiscal and monetary policies.

I'm not entirely sure on what I think we should do, but I certainly think we should run an expansionary fiscal policy (running a budget deficit by cutting taxes and/or increasing spending), but I'm not sure what to do about the Bush tax cut. I'm also not sure of which programs we should spend more on.

As for monetary policy, I guess selling bonds and lowering the Fed Funds rate would lower the interest rate, but the interest rate is already 1%.

For the auto industry bailout, I was thinking about the idea of using some of the $700 billion set aside for Wall Street, perhaps like $25 billion. I'm not really sure. I think a bailout might promote poor choices, but letting the big 3 fail would have a huge ripple effect.

What do you think? Any smart UGers out there?
#2
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wait.... wuttt???
#3
Though bailing out the auto industry will be important, that 700 billion bailout shout stay within wallstreet until they are stable again. The big three will have a ripple effect but if you take it from wallstreet too soon the ripple will become a tidal wave.
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#4
Well, in my opinion, the bailouts are only bandaids that will solve the problem for a short term.
And they are printing more money in order to pay for this stuff, which is just going to screw us all in the end anyways.
I'm not sure what exactly the right thing to do is, but what they are doing definitely isn't going to fix it.
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#5
I think I actually have a legitemite question (prolly spelled that wrong, but whatever...) about economics in general...


Which would have a better effect?
Raising taxes - to give more money to the governments for more failed bailout plans
Lowering taxes - to leave more money in the wallets of the lower classes, letting them buy more things from the local businesses (like walmart?) that basically uphold the economy.

eh?
#6
A) Your economics teacher(s) needs to realize (if they haven't) that there was an era of banking de-regulation in the 80's. With this, banks could offer 'risky' loans with highly fluctuating interest rates. Once banks were over there head in bad loans and with little or no capital, the S$#t hit the fan.

As far as a bailout for GM, screw that. These companies have done nothing effectively to compete with foreign automakers. The reason bankruptcy worked for the airlines was that it was an inelastic good (people need to fly for business). Not everyone needs a new car. It is an elastic good. People will wait to buy a new car or get it from overseas. I think a bailout would not be beneficial.

Lowering the interest rate can only go so far. Increasing the federal deficit will only create more burden and devalue the dollar.
#7
Quote by Patty-cakez
Which would have a better effect?
Raising taxes - to give more money to the governments for more failed bailout plans
Lowering taxes - to leave more money in the wallets of the lower classes, letting them buy more things from the local businesses (like walmart?) that basically uphold the economy.


Definitely lowering taxes. We're in a recession. Cutting taxes will increase GDP. It's called an expansionary fiscal policy, part of the Keynesian philosophy (run a budget deficit during recession). Increasing taxes is what we did during the Great Depression and that was the opposite of what we wanted. It's a contractionary fiscal policy, which helps the budget deficit but slows GDP.
#8
Quote by Patty-cakez
I think I actually have a legitemite question (prolly spelled that wrong, but whatever...) about economics in general...


Which would have a better effect?
Raising taxes - to give more money to the governments for more failed bailout plans
Lowering taxes - to leave more money in the wallets of the lower classes, letting them buy more things from the local businesses (like walmart?) that basically uphold the economy.

eh?


Gotta do both, first lower to encourage cashflow then once the consumers are buying again the taxes will have to rise to help tackle the issue of the debt.
The only things we hate are those things we try to hide from others.

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Either way, I don't think bananas should be placed in such proximity to an ass

I disagree. Bananas and ass are like peaches and cream.
#9
Quote by SuPaGrAm
Gotta do both, first lower to encourage cashflow then once the consumers are buying again the taxes will have to rise to help tackle the issue of the debt.


Yes, but not until the economy is prospering.
#10
I don't claim to be intelligent, but I think taking money from taxpayers and giving it to the big banks that made poor investment decisions is absolute nonsense. We already have, what, a ten trillion dollar and counting national debt? And should we really be mixing bureaucrats with corporations any more than we need to? The banks screwed up, and if they all fail, it's gonna suck. But that's going to leave room for newer, smarter businesses that hopefully won't screw our economy up again. Let Wall Street and the banks get what they deserve, and if it takes a decade or two to recover from it, it will be for the best in the end.
#11
Quote by maroon5mustdie
I don't claim to be intelligent, but I think taking money from taxpayers and giving it to the big banks that made poor investment decisions is absolute nonsense. We already have, what, a ten trillion dollar and counting national debt? And should we really be mixing bureaucrats with corporations any more than we need to? The banks screwed up, and if they all fail, it's gonna suck. But that's going to leave room for newer, smarter businesses that hopefully won't screw our economy up again. Let Wall Street and the banks get what they deserve, and if it takes a decade or two to recover from it, it will be for the best in the end.


+3458945234756349872

Oh, and despite my generally conservative ideology, we do need to revert to a high tariff to keep these cheap imports from destroying the economy like they have been for the last few decades, and the last 20 years especially.
Last edited by aedmiston at Nov 13, 2008,
#12
Lassez faire is the way I would approach it.

-Lower taxes
-Cut government spending
-Stop encouraging consumption

Those corporations were led to fail by their own faults and they should fail and should not be propped up by the government. It is letting the incompetent people in the market compete with the competent.

Inflationary booms such as the ones we had during the housing/dot-com bubble need to be fixed with corrective recessions, the sooner the better. The government has not allowed either of these recessions to take place and is trying to delay the inevitable, IMO.
Last edited by ih8u2 at Nov 13, 2008,
#13
1) Lower taxes to lower deadweight loss and therefore run capitalism more efficiently until it gets flowing again.

2) Screw failing corporations, yes people will lose their jobs but the companies are really just dead weights if they can't support themselves.

Quote by ih8u2
Lassez faire is the way I would approach it.

I don't believe in the Keynesian school of thought.

-Lower taxes
-Cut government spending
-Stop encouraging consumption

Those corporations were led to fail by their own faults and they should fail and should not be propped up by the government. It is letting the incompetent people in the market compete with the competent.


How do you suppose that will help capitalism start flowing again?
Last edited by Godsmack_IV at Nov 13, 2008,
#14
The problem with the GM situation is that they say they will soon run out of money to pay their payroll and operating expenses. If the government gives them 25 billion, that will last about a year, as they say they've been going through 2 billion a month.

After that year is up, and they run out of money again, what happens? Giving money to GM now would just be delaying the inevitable. If GM wants to survive, they need to change their whole business model, and fast.
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#15
I just asked my dad what he thought of my question i posed before. He said something about how it's a "necessary evil" to raise taxes, because the government needs the money to come in, but the tax money needs to be spent more wisely. However, he believed it was a hard question to answer seeing as how the job market's falling to shit, and barely anyone has the money to pay taxes, bills, and supply themselves with the usual luxuries of a decent-wage household.
#16
Quote by Godsmack_IV
How do you suppose that will help capitalism start flowing again?


Real credit can be supplied only by savings, so artificial steps to stimulate lending will only produce inflation.
#17
Quote by ih8u2
Real credit can be supplied only by savings, so artificial steps to stimulate lending will only produce inflation.

Then you meant discouraging lending not consumption right? Capitalism relies completely on people spending.
#18
Quote by Godsmack_IV
Then you meant discouraging lending not consumption right? Capitalism relies completely on people spending.


Spending and producing. The emerging markets that are predicted to be economic powerhouses within the next few years are not consumer based, they are export based. A successful economy, IMO, is based on production and not consumption. Savings help fund capital investment which is needed for production.
#19
Legalize Marijuana

That's right, legalizing marijuana is my solution to fixing the economy.

1. Allow it to be sold in stores but put a huge tax on it.
2. On average it costs $43.11 a day to keep a person in prison. Free the people that are in jail for marijuana related non-violent crimes and use that money.
3. Money used in the war on drugs would be freed up and could be used to help.
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#20
Quote by Patty-cakez
I think I actually have a legitemite question (prolly spelled that wrong, but whatever...) about economics in general...


Which would have a better effect?
Raising taxes - to give more money to the governments for more failed bailout plans
Lowering taxes - to leave more money in the wallets of the lower classes, letting them buy more things from the local businesses (like walmart?) that basically uphold the economy.

eh?


Hieghtening the taxes of the upper class and lowering it for the lower class
Due what you want as long as you vote Due!
#21
Quote by tayroar
Hieghtening the taxes of the upper class and lowering it for the lower class


What's the effect of that decision? Why do you think that's the better solution?
#22
Quote by ih8u2
Spending and producing. The emerging markets that are predicted to be economic powerhouses within the next few years are not consumer based, they are export based. A successful economy, IMO, is based on production and not consumption. Savings help fund capital investment which is needed for production.

Someone needs to consume and by limiting consumers to foreign countries than aren't we seriously limiting exchange?
#24
Quote by Patty-cakez
What's the effect of that decision? Why do you think that's the better solution?


Because the higher class will already spend the money because well they have it and if you take the money from them it really won't affect them that much. Give the lower class a tax break because they will spend more and it will all work out better.


also, we need to encourage employers to stop outsourcing through whatever means. More jobs equal more money equals happier economy.
Due what you want as long as you vote Due!
#25
Quote by Godsmack_IV
Someone needs to consume and by limiting consumers to foreign countries than aren't we seriously limiting exchange?


I'm not saying that consumers need to be limited to foreign countries. People can still consume but there should be a greater incentive toward savings and exports as opposed to imports and consumption.
#26
I've said this over and over again in the world economic crisis thread. There should be no bailouts whatsoever.

1.) Who is the Treasury Secretary for the U.S Government? Henry Paulson, the ex CEO of Goldman Sachs, an INVESTMENT BANK. He has repeatedly lied about the state of the economy. For me the warning sign came when he and Ben Bernanke went to Congress and asked for the $700 billion to be given to them EXTREMELY QUICKLY or the world would end. Scare tactics were obviously used here given that most of congress didn't even know what they were passing and so didn't want to be responsible if the economy did go down.

2.) The banks help fund congress. IE, they are bought and paid for. For this information search for the world economic crisis thread.

3.) One of the scariest things that I have found out is that our Governments really do not have a clue either what to do now, or, about basic maths. When my family were struggling financially my parents used to say "there is more money going out than there is coming in". This can be applied to my country (U.K). Gordon Brown has secretly screwed us over the past ten years. "No more boom and bust" he said. That is what he will be remembered for in history, that sentence.

4.) Finally, if you think it's bad now, you haven't seen anything yet.
#27
Quote by tayroar
Hieghtening the taxes of the upper class and lowering it for the lower class


The upper class already pays the majority of our taxes.