[quote]D Public wrote:
Normally, I would agree with you, but they are not using their capital…The main problem is that business owners don’t know which way things are going to go, so we are stuck in this stagnation…If you were to talk to a CEO of a large company, they will tell you “something just doesn’t feel right…”, so they don’t feel confident about taking on new projects or hiring more workers…This has a tremendous drag on our economy as demand is created from supply and supply is driven largely by employment…So, They are holding large reserves of cash waiting for someone to fix the problem, but the problem really doesn’t exist…as it is a confidence problem…
So, basically there must be a concerted effort by several people in the economy to start things up again…No company has enough influence to do this…So, they need the federal government to do it for them…The government doesn’t even need to use a lot of money to do this…It has more to do with leadership and communication than spending…It has to do with showing people we can get things through the door and fix problems in our society…The exact opposite of what is occuring in washington right now…
And as far as the bail out…We needed to save the banks…The fed gov has been paid back in full by every bank except allied…i would prefer if they had broken up the banks into segregated components(investment banks vs commercial banks)…but to let them fail would cost us more than if we even took a small loss on saving them which we didn’t(we had a gain)…
Now in regards to shifting paper, What I’m talking about is the $600 trillion derivative market where people just shift credit and interest rate risk around…The problem is that there is nobody on earth that knows which way interest rates are going to go at any given point in time…not even bernanke…There is always a counter party who takes the other side of the trade, and thus someone always loses…And interest rate swaps are tame compared to credit swaps…Nobody should be selling credit protection…it makes no sense and should not be allowed…It is not hedging…It is speculation…it only creates fear when things go bad and does nothing to improve our society when things are not bad…
so substantial amounts of capital have been allocated into this type of finance, and it is truly not productive at all…
anyway…Here is an interesting vid on marxism and the economic crisis…it explains things much better than I can…
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First, it is precisely because the uncertainty is caused by the government that more government action wont do any good because it causes more uncertainty.
Second, those derivate markets do something, if anything they make interest rates more stable than they would otherwise be, as does any other for of speculation for the base product.
Also, I have no problem if people want to bet the farm on soy beans, pork bellies or derivatives, IF I do not have to bail them out when they tank.
Finally, precisely because noone knows tomorrows interest rates, except of course Goldman Sachs employees sitting in on Fed meetings, the real economy needs a market where it can hedge the risk.
