merbig, calm down, we're talking about socialism, not bailouts per-se. Bush did not acquire ownership of the airlines when he bailed them out, neither did Nixon and the others you reference. I guess I used the wrong word, bailout, when the concept I wanted was that of government sponsored enterprise. This is because no one expects the airlines to be bailed out again, unless terrorists strike again. If Delta declared bankruptcy tomorrow, no one would expect a bailout, so no one will lend delta more money than it can pay back. The same could not be said for a re-privatized AIG or Fannie/Freddy.

Now, let me do your work for you. Bush did acquire ownership over the TSA. Real socialism at work. But it was not a diversification away from what government usual does, as the TSA is in the business of providing security. Well, GM provides cars, our government has never done that before.

Quote :

"They can believe what they want all they want. They are, after all investors, and investors have this habit of being wrong sometimes. But to sit here and say that the government would never let a company fail because it had previously bailed it out is an absurd statement."

You have completely missed the point. I made no such claim about bailouts. My position is that people are going to act as if the firm enjoys a government guarantee on its debt, so just as with Fannie Mae and Freddy Mac which enjoyed this implicit guarantee, they will be free to borrow at below market rates regardless of how poorly they are operating. What this means is, just like with Fannie and Freddie, instead of a debt crisis that wipes out the shareholders and gives creditors a haircut of a few pennies, when these government sponsored enterprises fail ten years from now they will leave at least a trillion dollar hole in the world whether the government assumes their losses or not. if they do, then tax payers eat it directly, if they don't, then tax payers eat it through their 401k. Although, you are right, as England discovered early in the 19th century, once you let everyone go bankrupt, the expectation of rescue does go away. But I am talking about what happens to the economy until then.

That is why I say the damage is done. The future is written, these firms already have access to cheap bottomless credit. And just like everyone else in that position, be it Greece, GSEs, or Congress, it will corrupt them into borrowing until the day it is no longer bottomless, and human society has thrown trillions of dollars worth of effort down a well of miss-allocated capital. The only way to prevent this future is either make it illegal for them to borrow, a law impossible to enforce, or kill them before they have a chance to borrow.

7/11/2010 6:12:18 PM

^ I agree with you up to a point. Under the current administration, I agree that they will be allowed to borrow as much as they want. But what makes you think that it will happen when a new administration comes in (whether it be in 2 years or 6 years)? You speak as though there is no chance for these companies to come out from the government's umbrella.

Take GM as an example. From what i have read and understood, is the government does plan to get rid GM. You act as though it could never happen, even though it has gone through heavy restructuring. And that when/if it does become independent from the government, it will still be propped up if it were to ever encounter financial problems in the future. I'm not saying that it wouldn't happen, I am saying that I really feel it depends on the administration in charge.

I feel that depending on the next administration we get, if the companies are still government owned, we could see the companies sold off or made public again as companies no longer under government control. Maybe some of the other companies will be dissolved, sold off in pieces, I don't know. And I'm not rejecting your idea that they could just be held onto by the government, sucking money from us. They very well could be. But to say that it's a a bell that you cannot "un-ring," I think is premature, especially at this point. I feel that it's a baseless claim.

Who knows? Maybe the companies will be nothing but a drain on our budget, maybe not. You say that these companies will never be self-sustaining. What evidence do you have of this? I'm not going to lie, I don't know much about the financial institutes since they were acquired, but I am hopeful of GM being self-sustaining. I think there are serious problem that have yet to be resolved with GM, but that's for another thread. And once GM is self-sustaining, when it is turning a profit, what makes you think that say in 20 years, GM is in financial trouble that the government will, without a doubt, swoop up and save the company again by making them a government sponsored company? They would probably get a bailout, which as I've shown, is nothing new, and from what I had learned when researching it, the government usually made money on the bailouts through interest.

7/11/2010 7:17:08 PM

Quote :

"Take GM as an example. From what i have read and understood, is the government does plan to get rid GM. You act as though it could never happen, even though it has gone through heavy restructuring."

Everything I said was under the assumption that the government sells the companies off in their entirety. It would not matter. They are still government sponsored enterprises whatever the government does or says. Try to remember: Fannie Mae and Freddie Mac were not government owned, they were sold off to private shareholders decades ago. And despite being privately owned, they could borrow at below market rates. That is because they were once government owned, and because of that fact, they would forever be viewed as government sponsored enterprises. Well, GM, AIG, Fannie/Freddy are now government owned. Selling them off and swearing on a bible that they will never again be government owned won't un-ring that bell. They are now GSEs and will forever be GSEs until the day they die.

And yes, the government usually turns a profit on early bailouts. But it is the nature of the private profits/public losses system that the boom/bust cycles will continue to grow, costing tax payers ever more until the government finally says no, bankruptcy for everyone. We just lost around a trillion dollars, and now that we have demonstrated our willingness to do so, we are going to try to lose more next time.

7/11/2010 8:32:25 PM

So, even if the government were to not help a company it previously owned more than it would any other company, it would still be a government sponsored enterprise? Please. You know as well as I do that what you're saying is not definitive. It's nothing more than a belief you hold. And while you are entitled to your belief, it will never be more or less than just that.

7/11/2010 9:08:23 PM

I said my evidence. How I said it will be, it already is. These GSEs already have favored below market interest rates. The previous batch of GSEs worked exactly this way last time. You have no evidence as to why the future should radically change from how it works in both the present and the past. So, yes, I am going to continue believing my own lying eyes over your dreams for the future.

7/11/2010 10:11:36 PM

Quote :

"-that America is anything but the most successful nation on Earth--is laughable."

Its actually common knowledge everywhere outside america.

We certainly aren't the top nation but I'm unsure where we rank after that.

Going strictly by HDI (probably the best thing to go by), we're 13th, norways 1st

We live in the 24th most violent country in the world, our education is very lacking, our energy situation is pathetic and we're the top polluters.

We're just a nation that has the largest economy due to capitalism running wild. A few people have most of that money and we're still only the 6th richest per capita. Norway is clearly better off than we are in every aspect except entertainment. We have the best entertainment industry. Thats all we can really claim.

At the end of the day, I rather have human rights than entertainment.

7/11/2010 10:21:13 PM

For Page 14:

Meanwhile, back in the real world. . .

Europeans Fear Crisis Threatens Liberal Benefits
May 22, 2010

Quote :

"PARIS — Across Western Europe, the 'lifestyle superpower,' the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II. Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism. Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. 'The Europe that protects' is a slogan of the European Union. But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead."

Quote :

"The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable. In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece's bloated state sector and its employees. 'They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,' he said. 'As for us, the way things are going we'll have to work until we're 70.' [Aw, poor thing. ] In Rome, Aldo Cimaglia is 52 and teaches photography, and he is deeply pessimistic about his pension. 'It's going to go belly-up because no one will be around to fill the pension coffers,' he said. 'It's not just me; this country has no future.' Changes have now become urgent. Europe's population is aging quickly as birthrates decline. Unemployment has risen as traditional industries have shifted to Asia. And the region lacks competitiveness in world markets."

Quote :

"'The easy days are over for countries like Greece, Portugal and Spain, but for us, too,' said Laurent Cohen-Tanugi, a French lawyer who did a study of Europe in the global economy for the French government. 'A lot of Europeans would not like the issue cast in these terms, but that is the storm we're facing. We can no longer afford the old social model, and there is a real need for structural reform.'"

http://www.nytimes.com/2010/05/23/world/europe/23europe.html

Quote :

"Correction: June 6, 2010 A chart with an article on May 23 about fears in Europe that the economic crisis there could lead to more austerity, such as reduced benefits and an increased legal retirement age, reversed the labels for the United States and Italy in trend lines comparing American and European ratios of working-age people to retirement-age people, an indicator of looming pension problems. The chart should show the trend line for Italy ending at a lower ratio than that of the United States, not vice versa, meaning that Italy's pension problems are more severe, not less."

Keeping dreaming, Utopians.

7/11/2010 10:27:28 PM

When the economy goes down anywhere it's the normal movements of the market, but when it happens in europe it's the big bad leftists right? Capitalism fails the entire world and for some reason it's the fault of those who criticize it.

7/11/2010 11:57:35 PM

^ Capitalism has not failed the world. And if you'd read the article, you'd see that it's a French lawyer, among many others, criticizing Europe's left-leaning policies, which according to his study and other indicators are failing.

Quote :

"'The easy days are over for countries like Greece, Portugal and Spain, but for us, too,' said Laurent Cohen-Tanugi, a French lawyer who did a study of Europe in the global economy for the French government."

7/12/2010 1:06:26 AM

Norway aint failin' yet...

7/12/2010 9:02:47 PM

Europe will be fine in the long run. Any place that is more capitalistic than America will do just fine. Markets will adjust, governments will slash spending, and business as usual will resume eventually.

7/12/2010 9:35:13 PM

Quote :

"And if you'd read the article, you'd see that it's a French lawyer"

Woopty damn do

7/12/2010 9:49:59 PM