Comments for Robert Samuelson's Troubled TARP Arithmetic at http://www.cepr.net , comment 1 to 14 out of 14 comments http://www.cepr.net Sat, 18 May 2013 13:06:14 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7869 Banks hoard money by taking depositor's money and the Fed's money and buying T-bills instead of making loans to consumers or small businesses. Hording money this way is like hiding money behind a wall; it does not change hands often enough to maximize economic activity. - NewsFromAnnArbor Tue, 29 Mar 2011 17:31:41 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7850 Behold the art form of economics per LS Duende, defined by Wikipedia as the undefinable ... [quote]El Duende is the spirit of evocation. It comes from inside as a physical/emotional response to music. It is what gives you chills, makes you smile or cry as a bodily reaction to an artistic performance that is particularly expressive. Folk music in general, especially flamenco, tends to embody an authenticity that comes from a people whose culture is enriched by diaspora and hardship; vox populi, the human condition of joys and sorrows.[/quote] - izzatzo Tue, 29 Mar 2011 02:18:28 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7846 Also, rentiers do not INVEST, they speculate in currencies, and other products OVERSEAS. That is why countries around the world were/are up in arms over the second round of quantitative easing: all that money goes overseas through banking intermediaries. And when these rentiers do take their privileged profits, again, their MPC is freakishly low, versus, say, the lower middle class or working class, who tend to spend almost all of their disposable income on consumption. Which group stimulates demand more? The MPC gives us that answer, it is intuitive and so easy to apprehend. Apologizing on behalf of rentiers is not. - LS Duende Mon, 28 Mar 2011 23:05:25 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7845 $150 Billion in Bank Profits IS like pulling it out of the economy, because the rentiers who 'earn' this income have an extremely low marginal propensity to consume (MPC) it, as opposed to--under a nationalization scheme--using it as a transfer payment to a more worthy group lower on the socio-economic ladder; i.e. one that did not systematically mal-invest and defraud and accumulate only to derail the American economy. Nationalization would have insured future financial market stability by preventing future financial excess. And all while diminishing these rentiers massive influence on politics today. Yeah, wow, gosh, that would have sucked. Thank god, instead, that we returned to the status quo ante bustum. No worries there. - LS Duende Mon, 28 Mar 2011 22:57:27 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7829 "(Samuelson tells us that nationalization would have been complicated, so was TARP. Life's tough.)" It's absurd to skip over this so blithely. Yes, life is tough. But it's much tougher in some situations than others. And nationalizing institutions the size of Citi and BoA -- even assuming that the government had the legal authority to do so, which it didn't -- would have been many orders of magnitude more complicated than TARP. TARP was not, in fact, all that complicated -- the government injected the capital, and in a couple of cases backstopped debt, and got a good result. Nationalization, by contrast, would have been an immensely complicated -- and far more costly -- enterprise. I'm also mystified by the idea that profits and compensation are "pulled out of the economy." They're not pulled out of anything -- they're in the economy just as much as money in the government's hands is. - K. Williams Mon, 28 Mar 2011 07:47:30 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7826 To use your firehose analogy, the children did, in fact, get saved, which is kinda key. I think the cost of a collapse would have been much higher than Samuelson estimates. So the government didn't get as good a return as Buffett. So what? A 1% return is still better than a loss. So maybe the government subsidized the profit of Buffett. Not cool, but, if, in the same action they also preserved the life savings and the job of ordinary Americans like me, that is still a positive in my eyes. One alternative you mention is nationalizing the banks. There may be a million Americans who would support that, but for every one that does there are five who would be screaming 'socialism' in a crowded theater. You seem to be saying that if the Girl Scouts don't sell cookies, that going broke is not the only alternative because they could sell coconut tofu instead. Coconut tofu is healthier than processed cookies, but the public isn't gonna buy it. - Thomas Mon, 28 Mar 2011 05:23:24 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7824 First, I would say, yes unemployment would be higher if we had chosen to nationalize the bad banks. All those unemployed CEOs, CFOs, etc. who would rather draw unemployment than go work at walmart. Second, tho I disagree with the assumption that the unemployment numbers wouldn't have risen under bank nationalization. We were/are running a fraudulent casino economy, based upon bubbles. A gov't run system would have ended those bubbles. Without those, we would return to a state of slow growth. The accelerated expansion gave many more ppl jobs than were truly available without that bubble. Say in non-bubble economy there are only 150,000 jobs created a month. Yet in bubble economy it is 300,000. What do we do with those persons that live in that difference? Maybe to rebut my own point, we are offshore outsourcing at an accelerated pace so that those unemployed can become employed again. - ep3 Mon, 28 Mar 2011 04:57:21 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7823 And it could have been done much faster than TARP! Hmmm, I wonder why Bernanke never wanted to do it? Perhaps Ben is being paid off by the bankers. Yeah, that's gotta be the reason. - Paul Mon, 28 Mar 2011 03:58:53 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7822 It appears that if we had managed the banks intelligently, one of the uglier aspects of the healthreform law, the cutbacks in spending for seniors' vision and dental care, might have been easily avoided. - Jorge Mon, 28 Mar 2011 03:12:36 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7821 Aren't we also forgetting the fact that the banks "profits" are largely due to suspension of mark-to-market and a monstrous fleecing of savers through zero interest rates? Robbing Peter to profit on your investment in Paul, doesn't mean that your investment in Paul was a smart one. - Spike Mon, 28 Mar 2011 02:49:09 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7820 We have not yet seen the real cost of TARP, which will appear in the next financial collapse. Nothing has been done to prevent it. - skeptonomist Mon, 28 Mar 2011 02:48:13 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7819 There's no opportunity cost in a severely deflationary environment. In fact, it's the opposite -- there's opportunity risk. Funny how economists assume a one-way street. Deflation is the boogie man that ruins all standard economic assumptions. "So we can't let it happen, or our theories will be ruined." Actually, deflation is the great equalizer, because it eliminates those that are leveraged. The rich are leveraged, the poor are not. - Wild Bill Mon, 28 Mar 2011 02:11:03 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7818 [quote]Samuelson's analysis would be comparable to noting that a particular fire hose was used to put out a school fire, saving dozens of children.[/quote] Exactly Whose Your Nanny. Samuelson doesn't understand that under free market competition firefighters have choices among a wide range of fire hoses. Marketing and advertising experts in Monopoly Propaganda USA who specialize in opportunity cost education for consumers were the first to realize the unique value of TARP. If competition for fire hoses actually existed, there would be a lot less fires to start by arsonists like Samuelson who then assess huge firefighter fees under the American Rescue Hero Business Model for the forced collection of economic rent. Stupid liberals. - izzatzo Mon, 28 Mar 2011 01:35:51 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-troubled-tarp-arithmetic#comment-7817 I don't think it's fair to consider profits money pulled "out of the economy." As you note, profits support "the consumption of bank shareholders and executives." This may not be the most desirable outcome, but particularly in an economy where demand is falling it is far more than just pulling money out of the economy. Cutting the deficit would be pulling money out of the economy, because the money simply disappears; increasing the deficit to bail out banks in fact puts money into the economy, even if it inefficiently does it by giving more to the wealthy. Also, charging an opportunity cost to deficit spending, while technically true, seems unrealistic. What is it that we might have invested $700 billion in during an economic collapse that would bring us such a high rate of return? And, politically, what is it that makes you think we could get Congress to improve massive deficit-financed investment for the sake of profit only, rather than for the sake of economic stability? - Tom Johnson Mon, 28 Mar 2011 01:28:56 +0100