The Economic Crisis

[binary010101]

To the economy, that is.

[SiegeLord]

Dow stumbles to 6-year low

[chia]

sounds like the dawn of the apocalypse to me

[andrewwski]

It always recovers. Always.

[bah]

Hmmm, so yeah. Stuff happened I guess.

I tend to think in classical rational terms.... so the whole government intervention business is highly non-intuitive for me....

Why must we help people that are getting their homes foreclosed? In my way of thinking... foreclose on the homes...the banks dump the houses onto the market.. and investors come and sweep them all up at great low prices.. then they become landlords and the foreclosure victims can rent from the new landlords.... People who were supposed to rent anyway now rent, instead of owning a home that they could not afford anyway.

And lower prices is the cure to the economic crisis.... rationally... people who save can take advantage of the low prices and buy up depreciated assets. Therefore, a recession rewards those who have saved up money for the bad times.

But here... the government is trying to prop up the prices, especially the housing prices.

I am of the belief that individual human action is extremely powerful.... If I want to save money and not spend in hard economic times... so be it... you'll have to do more than lower interest rates to stimulate spending... I just don't want to spend. I don't want a new TV.... I don't want a new car.... It just so happens that I don't want a new car.... Now the consequence of that is businesses go down the toilet, and people lose their jobs.... so wages and prices get depressed.... that alone is incentive for efficient reallocation of resources......

How the heck does Keynes demonize saving money during a recession? It is the rational thing for any individual to do. You can't stop it, sir.

Resources were malinvested in the housing sector... a complete collapse of that sector would liquidate the resources there and reallocate them into more efficient uses.
Instead, what we are doing here is propping up the housing sector.

[Liv]

It always recovers. Always.

Well ya, as long as you think that always is in a few(1 or 2) years

[andrewwski]

I don't. It may take longer than that. It may take 3 to 5 years. But it will recover on its own.

[Jocool]

on its own? on its own? its been on its own for 5 months and its been on a steady train to pigeon. thats why we need to do stuff now like the stimulus thing

[volleyballchic_101]

ok, we are in a downward sprial weather people want to believe or not. the economy will bounce back hopefully in a couple years but is that really fast enough? also you have to think the last stimulas plan didnt work so will a new one? can we really get out of the debt by spending more tax dollars, having more bussiness created but having to get thousands of loans? im asking y'all do you honestly think our economy can come back,on its own or will we fail as a nation. Because right now its not looking good and i dont mean to sound like obama but we need change and we need it now and none of the reasons i can think of will work but sitting here doing nothing wont work ethier

[andrewwski]

on its own? on its own? its been on its own for 5 months and its been on a steady train to pigeon. thats why we need to do stuff now like the stimulus thing

5 months. Big whoop-dee-do. You do realize that economic cycles last years, not months, right? There's no way we're going to get out of this in a year...it'll take a few years at the least.

The "stimulus thing" as you call it may or may not help. But it won't end the recession. Will it alleviate some of the problems? I hope so. That's what it's supposed to do. Will it? Only time will tell.

But will it end the crisis? No. The government helps to moderate the fluctuations in the economy, but in itself will not be responsible for the recovery, just as it is not responsible for this mess in the first place.

Even our worst economic crisis in history was not corrected by the government. While the New Deal certainly inspired hope and did help address the problems we were facing, it did not end the depression. World War II did.

Look at any other recession - or even period of economic prosperity - and you'll see that it's going to recover itself.

That doesn't mean I oppose the stimulus package. It may very well help. Am I sold on it? No. But we'll see.

Things may still get worse before they get better. I don't know where the low point is. Only in retrospect will we know. But the economy will recover. Yes, on its own. It always does, and it's the only way that it will.