Gfranc
Banks made bad loans (also) because their loans were risk free. They were leveraging because they could. I agree they shoulder the blame, but so do the guarantors of those loans, US Government.
Thanks again for the replies... I copied this and will review it several more times to further my understanding. I was obviously misguided.
I consider myself someone centrist, but I certainly lean towards limited government. Such talk of nationalizing banks to me is dangerous in the long term. I'm not even sure how that would be considered constitutional. But in our situation, hell, they are basically all quasi nationalized anyway. The current structure allows far worse in that only losses are nationalized. So our choice under current policy is to nationalize or recapitalize? We need better options and policy that allows for banks to fail when they make bad loans. But again, can Keynesian theory even be successfully applied in this environment? Don’t we basically have to have smaller banks or national banks in order for it to work? I agree with the idea that banks should be broken up. The TBTF are alive and well and bigger than ever. That is one of the #OWS grievances I can get behind. Most of the others, to me, are pure nonsense, but that is an entirely different discussion.
Again, thanks for the insightful discussion…time is limited.
We got off the original track here… I can tell you why this original post sparked my interest, and it’s that I was angered by #OWS’s attacking business and corporations, when the vast majority of them (my employer) are innocent and profoundly important. I was intrigued by your reply but I disagreed that they weren’t attacking manufacturing or retail. What else is “corporate greed”? Then you stated that the “ Federal Reserve is funneling free money to banks” and I thought, of course they are. I kept hearing Krugman’s arguments that they didn’t do this or didn’t do that…and my thought was, when are you (Krugman) going to realize that they aren’t going to? When will you realize that this theory will never be applied in a manner that is actually helpful? As long as we live in a divided state, with a fed that is manipulated and a banking industry that is guaranteed by their importance to the fed philosophy… the application will always create messes like this one. I firmly believe the next one will be even bigger.
Krugman may be right on his grievances, but I think he’s wrong to ever believe it will be done right. We simply keep getting left with fewer and fewer options.
Sure, they have the right to protest and ban online courses...but let's be realistic, this is in no way protective of students. This is 100% a "save our own ass" initiative. Call it what it is. Anyone that remembers their first two/three years of college can attest to the utter nonsense that is classroom lecturing.
Of course the fed is bailing out the banks...they always will, they are the banks! This is a very, very dangerous road. We've made a real mess out of something that really is simple. I can't say it better than this. http://unqualified-reservations.blogspot.com/2011/10/profess...
So we lower interest rates and print money. Then we tell banks to loan and we use revenue (or printed money) to invest in "infrastructure" or to just drop money from helicopters. So what happens when debt gets so high from spending that you'll never repay it in several generations? What happens when all this doesn't work? What happens when the savers get wiped out? Did they write that part in the economics textbooks?
I guess we just reset? And start all over at 1913? I'm seriously asking. What? I wonder if the #OWS gang understands that by reseting they wipe out their parents and their grandparents... are they ready for that?
I'm far from right wing, I believe tax is essential to prosperity, I also believe in infrastructure spending, and social security to a point. I do however believe that government (both right and left) is eternally corupt. I also believe the taxes will never be high enough to give everyone everything they want. It's like talking to my 16 year old niece. She wants to live at home, play on her IPad, party till 2 in the morning, drink herself stupid, and has no idea where her dad is coming from when he says it will end one day if she doesn't wise up. It will end well, or very very poorly. She just riots in the street and talks about all the things that are owed to her for existing.
I guess this is just frustrating because this really was simple. We should have forced people (banks) to bare the burden of their decisions (loans!). We force investment banks and investors to do the same. The market really does regulate itself...but when politicians tinker...bad things happen. Nationalizing the banks? Why the hell would any right minded fed chairman do that? Like I say, great in theory, horrible in practice. Krugman is pure theory.
The bottom line is that Kenyesanism has been a disaster due to it's constant corruption from political parties and the revoloving doors. Krugman always provides the answer, straight from the textbook. In the end, we all end up like Greece. And I'm sure Krugman will be along saying, well the text book says....
The Inflationists like Krugman can never be proven wrong, as the answer always is "the stimulus wasn't big enough", "the stimulus wasn't properly targeted", it's always that their was a small error in calculation rather than the philosophy is completely bogus. In circles we go.
http://www.washingtonpost.com/wp-srv/special/politics/30-yea...
Why do we assume that "rich people" are all wall street people? Does everyone that makes over $200K a year work on Wall Street? I, frankly, am offended that people like my neighbor (who owns a local chain of muffler shops, and works his ass off) is representative of a Wall Street "financial barrron". Sure, he makes probably a few hundred K a year, but did he earn it? Hell yes he earned it. The comparison is obsurd.
The way people like Krugman use one unrelated issue to argue for another...is offensive. Elizabeth Warren is not trying to punish Wall Street, she is trying to punish the rich. There is a big difference. Krugman, you sir are a useful idiot.