What would the US look like now if the government had done nothing?

Stella777

Imagine if the government had done nothing. Let the failing banks fail. Let the houses be reposessed. No bailouts. No stimulus. No Cash for Clunkers. Nada!

What do you think the country would be like now if the government had stayed on the sidelines? Better or worse? Short term vs. long-term?

rightwingdub

Stella777 wrote: »

Imagine if the government had done nothing. Let the failing banks fail. Let the houses be reposessed. No bailouts. No stimulus. No Cash for Clunkers. Nada!

What do you think the country would be like now if the government had stayed on the sidelines? Better or worse? Short term vs. long-term?

Short term pain for long term gain would have been the rseult, the efficient banks would have survived and decondly future generations would not have been crippled with heavy taxes to try and clear America's balooning budget deficit.

20Cent

Stella777 wrote: »

Imagine if the government had done nothing. Let the failing banks fail. Let the houses be reposessed. No bailouts. No stimulus. No Cash for Clunkers. Nada!

What do you think the country would be like now if the government had stayed on the sidelines? Better or worse? Short term vs. long-term?

They did let the houses be repossessed didn't they?

kev9100

Stella777 wrote: »

Imagine if the government had done nothing. Let the failing banks fail. Let the houses be reposessed. No bailouts. No stimulus. No Cash for Clunkers. Nada!

What do you think the country would be like now if the government had stayed on the sidelines? Better or worse? Short term vs. long-term?

If the Goverments had decided to do nothing, the vast majority of countries would be in a severe depression which would make our current recession look like a mere blip. Yes, many of the Government rescue packages were flawed, but if we had sat on our hands and done nothing, we would currently be in a far worse place.

SeanW

I rather imagine it would have been like the Crash of 1920.

jank

More like the 30's. Depression MkII

Amerika

Not much of a difference in my opinion, except now we and our children, are saddled with unsustainable debt. The stimulus package should have focused on reviving the economy, but the majority spent seemingly wasn't. Instead, much of it was used, and will be used in the near future, to advance many of this administrations political priorities.

BluePlanet

Since WWII America has always been in debt.
What's so particularly unsustainable but the current debt?
Why it is unsustainable now, but wasn't 4 or 5 years ago?
What has changed?

Can someone explain this to me, i'm not getting it.

Amerika

Our budget deficits seem to be targeting at a growth rate of $1.3 trillion annually going forward. And becasue of that our debt climbs to 98 percent of GDP (gross domestic product) by 2020, and even continues to grow afterward. That is unsustainable.

Here, this explains it far better than I can.
http://www.midwestfreepress.com/2010/01/27/future-us-deficits-are-unsustainable/

BluePlanet

It's funny, that article carries out about how unsustainable the debt is, and then bemoan Obama's plan for healtcare.

Thus, President Obama’s spending agenda–which would be unaffordable even in good budget times–is completely unrealistic in this sea of red ink. On top of this baseline, the President would spend trillions of dollars on a new health care plan

Yet they don't go near the 500billion pound elephant in the room - Defense Spending.

I guess for american's it's more important to have a mountain of 1 million dollar missles then it is to provide basic healthcare to it's citizens.

ChocolateSauce

I think the country would be on the verge of collapse; there'd be food riots, mass homelessness. It would be the 30's all over again, and like the 30's it would drive people to the left.

Ultimately, I feel it would have been desireable over the current situation, in the long run at least. It would have forced people to learn to never live beyond their means. Instead, we've learned that no matter how badly the financial marketeers **** things up, the governments of the world will force average people to pay for it.

Go Iceland.

Black Swan

There probably would have been a second Great Depression, and the rich executives and major position equity holders would not have been able to run out the back doors of banks, investment firms, and AIG with the bags of taxpayers bailout monies that just came in the front door.

It has not made a difference whether the Republicans or the Democrats controlled the US Congress either. Under GW Bush the federal deficit doubled. Now under Obama it will probably double again. It's part of the US American culture... If you cannot afford it, whip out your credit card and charge it. Their government has been doing the same since the economic meltdown that began with Bush and continues with Obama. So finger point all you like at Democrats or Republicans, but the only way I see my thumb going is down to both of them.

Nodin

kev9100 wrote: »

If the Goverments had decided to do nothing, the vast majority of countries would be in a severe depression which would make our current recession look like a mere blip. Yes, many of the Government rescue packages were flawed, but if we had sat on our hands and done nothing, we would currently be in a far worse place.

Essentially. And I doubt a Republican or alternative Democrat one would have acted that differently.

silverharp

I like this graph , give us the money or else

Anonymous1987

rightwingdub wrote: »

Short term pain for long term gain would have been the rseult, the efficient banks would have survived and decondly future generations would not have been crippled with heavy taxes to try and clear America's balooning budget deficit.

Amerika wrote: »

Not much of a difference in my opinion, except now we and our children, are saddled with unsustainable debt. The stimulus package should have focused on reviving the economy, but the majority spent seemingly wasn't. Instead, much of it was used, and will be used in the near future, to advance many of this administrations political priorities.

In times of extra-ordinary economic recession such we are now experiencing the stimulus and credit losing policies will likely have prevented the recession snowballing into a depression, remember "The market can stay irrational longer than you can stay solvent".
The government should have saved during the boom times (which would have dampened demand and may even have prevented the bubble, although would have proved unpopular with voters). Rather instead the Bush administration managed to increase national debt during the boom times. I don't want to be drawn into a partisan debate but that is a fact acknowledged by many republicans. The current policies are indeed necessary if costly but even more costly would be to allow the good companies to fail. The problem of the stimulus package is that the economy is globalised it may not necessarily stay in the US economy. This is reflected in the Buy-American clause and the minor trade battle with China.

Anonymous1987

Silverharp2 wrote: »

I like this graph , give us the money or else

Its obviously a piece of propaganda, how could you make accurate figures with hypothetical scenarios if you are already struggling with real data but at the same time the do-nothing approach is equally dangerous. It implicitly assumes volatility is good while I would be under the assumption that a flatter business cycle would have greater gains. After all businesses and employees thrive under stability.

silverharp

Anonymous1987 wrote: »

Its obviously a piece of propaganda, how could you make accurate figures with hypothetical scenarios if you are already struggling with real data but at the same time the do-nothing approach is equally dangerous. It implicitly assumes volatility is good while I would be under the assumption that a flatter business cycle would have greater gains. After all businesses and employees thrive under stability.

I dont understand your "propaganda" comment? But it raises the issue of believing official projections in an effort to push something through. That graph was originally issued when Obama's stimulus plan was being put together.
If I went back to 06 and 07 the Fed was obvilious or willfully blind to how bad the unfolding situation was, remember "sub prime is contained".
the point I'm trying to make is that trying to centrally run an economy on bogus facts is worse then "doing nothing"

Anonymous1987

Silverharp2 wrote: »

I dont understand your "propaganda" comment? But it raises the issue of believing official projections in an effort to push something through. That graph was originally issued when Obama's stimulus plan was being put together.

Sorry I only took a quick glance at the graph didn't even notice the red dots indicating the actual figures. What I meant by propaganda is that the figures are presented as facts in order to support the stimulus package but in reality are subject to great uncertainty and inaccuracy. So I'm actually in agreement with you on this. This should not undermine the policy itself as it likely did save jobs but its very difficult to put a number on it. We were facing a depression and instead we have to date a severe recession.

Silverharp2 wrote: »

If I went back to 06 and 07 the Fed was obvilious or willfully blind to how bad the unfolding situation was, remember "sub prime is contained".

It's true the Fed played a major part in the credit crunch with the "great moderation" policy approach and I cannot defend this. At best it was poor policy and at worst it was political interference.

Silverharp2 wrote: »

the point I'm trying to make is that trying to centrally run an economy on bogus facts is worse then "doing nothing"

Point taken and I agree. I would say though that despite the Feds role in creating the bubble now is certainly not the time to dismantle the Fed if ever. Its policy to combat the credit crunch once recognised has been successful to date.

silverharp

Anonymous1987 wrote: »

I would say though that despite the Feds role in creating the bubble now is certainly not the time to dismantle the Fed if ever. Its policy to combat the credit crunch once recognised has been successful to date.

metal note to dig up this thread in 3 years time . Time will tell, I'm suspicious of the whole rescue as much of has been built on smoke and mirrors. The banks have been allowed to continue with "mark to myth" so for all we know the Fed is setting everyone up for a bigger fall later on.

Anonymous1987

Silverharp2 wrote: »

metal note to dig up this thread in 3 years time .

I will await that time with quiet confidence and a slight fear of what if they're wrong hence my cautious use of "to-date".

Silverharp2 wrote: »

Time will tell, I'm suspicious of the whole rescue as much of has been built on smoke and mirrors. The banks have been allowed to continue with "mark to myth" so for all we know the Fed is setting everyone up for a bigger fall later on.

I don't believe it's smoke and mirrors. The notion of "printing money" is very popular because people feel money should be tangible but after all money is just a social construct so it doesn't matter a great deal if its a physical commodity like gold or just imaginary like the "money" on your credit card. Its kinda like downloading music on the internet, you have a longing for the CD because it's a physical product rather than just existing on you're laptop or Ipod.
I do share your concern on the moral hazard issue and I have my suspicions on political manipulation in the Fed and I believe they could certainly benefit from some sort of restructuring but I quiet strongly believe the market is too wild to be left unconstrained. This might be of interest.

silverharp

Anonymous1987 wrote: »

I will await that time with quiet confidence and a slight fear of what if they're wrong hence my cautious use of "to-date".

I don't believe it's smoke and mirrors. The notion of "printing money" is very popular because people feel money should be tangible but after all money is just a social construct so it doesn't matter a great deal if its a physical commodity like gold or just imaginary like the "money" on your credit card. Its kinda like downloading music on the internet, you have a longing for the CD because it's a physical product rather than just existing on you're laptop or Ipod.
I do share your concern on the moral hazard issue and I have my suspicions on political manipulation in the Fed and I believe they could certainly benefit from some sort of restructuring but I quiet strongly believe the market is too wild to be left unconstrained.

As it happens I'm not concerned with inflation and "money printing" going forward as the US economy has a 30T+ deflating economy versus a Fed that can only inflate by a couple of trillion. So I guess my point is that the Fed will fail and have just postponed something that will happen anyway.

As for what money should be, in theory I'd be a happy with an algorithm as a physical gold standard. The important point is that money has a "weights and measure" element to it but this feature has not been respected. A sound currency and unlimited government are incompatible.