Open Market Operations.

[mike777]

I thought the one thing Economists knew how to do is fix a liquidity crisis.

 

I am surprised we don't simple use Open Market Operations and flood the economy with money. Buy Treasury securites(pieces of IOU electronic paper) with cash (another piece of electronic paper).

 

Add in slower acting but an effective Flooding of Fiscal spending for infrastructure I would think this would create plenty of liquidity.

 

How to deal with the resulting inflation and debasing of various assets is another issue.

 

If falling housing prices is the problem you can inflate these assets.

 

Open Market Operations do not require a new act of Congress.

 

http://en.wikipedia.org/wiki/Open_market_operations

[luke warm]

why not just do away with the capital gains tax?

[PassedOut]

The Fed has already been increasing the supply of money: Treasury and the Fed Looking at Options

 

Even before the House stunned the world on Monday by rejecting the Bush administration’s bailout bill, the Fed was already resorting to the oldest action in its book: printing money.

 

With money markets around the world seizing in fear, the Fed on Monday announced that it would provide an extra $150 billion through an emergency lending program for banks, and an additional $330 billion through so-called swap lines with foreign central banks to help money markets from Europe to Asia.

And I don't think many people will be paying heavy capital gains taxes this year.

[Al_U_Card]

But will they be applying capital losses against future capital gains? (There is more than one way to skin a cat...)

[hrothgar]

why not just do away with the capital gains tax?

Ever heard the expression "A solution in search of a problem" ?

 

It almost feels like Conservatives has an ingrained bias in favor of taxes cuts. They seem to trot taxes cuts out regardless of what issue is at hand.

 

The Federal government is running a surplus - Better issue a tax cut

The Federal deficit is running a deficit - Better issue a tax cut

The US is dependant on foreign oil - More tax cuts are needed

Wall Street is melting down: You guessed it - Tax cuts

 

I don't find it at all surprising that the religious zelots on bulletin board also seem to be the ones who buy into this same type of mindless mantra regarding tax cuts

[barmar]

I guess I don't have to ask Richard how he plans to vote next month on Massachusetts Question 1. :)

[helene_t]

Buy Treasury securites(pieces of IOU electronic paper) with cash (another piece of electronic paper).

Maybe better buy junk mortgages, after all it will help the banks to get rid of those more than it will help them to get rid of treasury certificates.

[cherdano]

why not just do away with the capital gains tax?

Jimmy, no serious economist from which I read comments in the last few days took this idea seriously. There is just no reason why this should work. Eliminating capital gains tax doesn't mean that suddenly everybody invests into the mortgage marked or starts buying investment banks, and the liquidity problem gets solved. (And I read about this in a lot of different places.)

 

I would suggest that you subtract some economic credibility from whatever source you got that idea from, seriously.

[Lobowolf]

why not just do away with the capital gains tax?

Ever heard the expression "A solution in search of a problem" ?

 

It almost feels like Conservatives has an ingrained bias in favor of taxes cuts. They seem to trot taxes cuts out regardless of what issue is at hand.

 

The Federal government is running a surplus - Better issue a tax cut

The Federal deficit is running a deficit - Better issue a tax cut

The US is dependant on foreign oil - More tax cuts are needed

Wall Street is melting down: You guessed it - Tax cuts

 

I don't find it at all surprising that the religious zelots on bulletin board also seem to be the ones who buy into this same type of mindless mantra regarding tax cuts

And of course the flip side from the other side of the aisle...the "solution in search of a problem." As long as "problem X" can conceivably be remediated by money, we've got a solution! -- Take more money from "rich" people and pay for whatever you don't have. Oh, and remember me at election time.

[cherdano]

Yeah, those leftist bastards who came out with the bailout plan should be fired from ever getting close to running this country again... :(

[mike777]

Buy Treasury securites(pieces of IOU electronic paper) with cash (another piece of electronic paper).

Maybe better buy junk mortgages, after all it will help the banks to get rid of those more than it will help them to get rid of treasury certificates.

Helene, Open market operations can only buy treasuries.

 

The theory being you flood the economy with trillions of bucks. Those bucks need to go somewhere which creates liquidity.

 

 

It would also inflate assets such as homes that have been falling in valuation.

 

Of course inflation and debasing assets creates problems of its own. See Germany in the 1920's as an extreme case or parts of Africa today.

 

The only reason I bring this up is I keep hearing we are in a liquidity crises and something needs to be done today, now!

[Lobowolf]

Yeah, those leftist bastards who came out with the bailout plan should be fired from ever getting close to running this country again... :(

You mean the ones who all compare themselves to Kennedy, who cut taxes to stimulate a sluggish economy? If you want a bailout to PASS, then Pelosi should probably be barred from ever getting close to giving a pre-vote speech.

 

 

I think that there'd be strong Congressional support for the proposition that "Significant government intervention (i.e. "bailout") is required."

 

The question of any particular plan is a much harder sell.

[jdonn]

If you want a bailout to PASS, then Pelosi should probably be barred from ever getting close to giving a pre-vote speech.

Pelosi is dispicible and so was her partisan speech. That being said, anyone from either party who changes their vote in either direction over something like that is an even-more-partisan whiny baby who deserves nothing but insults, mockery, and bad fortune for the rest of his or her life. So she gave a speech, big freaking deal, ignore her and move on. The vote impacts the entire economy!

[Lobowolf]

If you want a bailout to PASS, then Pelosi should probably be barred from ever getting close to giving a pre-vote speech.

Pelosi is dispicible and so was her partisan speech. That being said, anyone from either party who changes their vote in either direction over something like that is an even-more-partisan whiny baby who deserves nothing but insults, mockery, and bad fortune for the rest of his or her life. So she gave a speech, big freaking deal, ignore her and move on. The vote impacts the entire economy!

Agree.

 

I strongly expect a bailout to pass Thursday. The question isn't "Bailout?" It's "Which bailout?" While there is a time-critical element to the discussion, I don't think that a general need for a bailout should necessarily stampede people into a vote for any particular bailout.

 

With respect to delaying the bailout and the hoped-for stability it will bring, I'm more P.O.'d that they're taking days off than I am that Bailout 1.0 didn't fly. Maybe there are procedural requirements that don't make it possible to work through? I suspect that if this were a private sector crisis, the key people in its resolution wouldn't have holidays off.

[jdonn]

If you want a bailout to PASS, then Pelosi should probably be barred from ever getting close to giving a pre-vote speech.

Pelosi is dispicible and so was her partisan speech. That being said, anyone from either party who changes their vote in either direction over something like that is an even-more-partisan whiny baby who deserves nothing but insults, mockery, and bad fortune for the rest of his or her life. So she gave a speech, big freaking deal, ignore her and move on. The vote impacts the entire economy!

Agree.

Then I'm confused, could you further explain your first comment? Are you saying that some House Republicans ARE the type of people I describe, given that the House Republican leadership blames (at least largely) Pelosi's speech for the bill not passing?

[Lobowolf]

If you want a bailout to PASS, then Pelosi should probably be barred from ever getting close to giving a pre-vote speech.

Pelosi is dispicible and so was her partisan speech. That being said, anyone from either party who changes their vote in either direction over something like that is an even-more-partisan whiny baby who deserves nothing but insults, mockery, and bad fortune for the rest of his or her life. So she gave a speech, big freaking deal, ignore her and move on. The vote impacts the entire economy!

Agree.

Then I'm confused, could you further explain your first comment? Are you saying that some House Republicans ARE the type of people I describe, given that the House Republican leadership blames (at least largely) Pelosi's speech for the bill not passing?

I only know one House Republican well enough to answer, and for him I'd say no. But I think that given a possibly close and certainly important vote, why take chances? Lots of people are, or at least can be, quite petty. Yes, that's a particularly horrible quality (sic) in a Congress member; however, to the extent that we recognize and praise Obama's and/or McCain's ability to bring bilateral support to measures, and to the extent that it's an important quality in a leader, then I think the flip side is that divisiveness, particularly at a time like this, is rightly criticized.

[jdonn]

I'm fine with criticizing her. But you were implying that she was the reason it didn't pass...

[Lobowolf]

I wouldn't go that far on the first vote...the margin was big enough that I don't think there were that many boneheads (if any). But if the vote's going to be close on Bailout 2.0, I'd rather she kept her mouth shut.

[jdonn]

Ok, I doubt I'll drag this on much farther since I feel like what you post keeps shifting just enough to keep the last thing consistent. It simply seems to me that you can find distaste in what she said, but that if it had any impact at all on the vote, the blame goes to only those (Republican) who were impacted, not her. And since they are the ones saying she "poisoned" the vote...

[luke warm]

why not just do away with the capital gains tax?

Jimmy, no serious economist from which I read comments in the last few days took this idea seriously. There is just no reason why this should work. Eliminating capital gains tax doesn't mean that suddenly everybody invests into the mortgage marked or starts buying investment banks, and the liquidity problem gets solved. (And I read about this in a lot of different places.)

 

I would suggest that you subtract some economic credibility from whatever source you got that idea from, seriously.

arend, there are economists who do say that eliminating the cgt would result in much more money in the markets... nobody posting here has the expertise to say it would do no good, imo

why not just do away with the capital gains tax?

Ever heard the expression "A solution in search of a problem" ?

 

It almost feels like Conservatives has an ingrained bias in favor of taxes cuts. They seem to trot taxes cuts out regardless of what issue is at hand.

 

The Federal government is running a surplus - Better issue a tax cut

The Federal deficit is running a deficit - Better issue a tax cut

The US is dependant on foreign oil - More tax cuts are needed

Wall Street is melting down: You guessed it - Tax cuts

 

I don't find it at all surprising that the religious zelots on bulletin board also seem to be the ones who buy into this same type of mindless mantra regarding tax cuts

i don't know what it has to do with religious zealotry... i could with equal illogic say that atheists buy into socialism... what would happen if there was no capital gains tax, richard?

[Lobowolf]

Ok, I doubt I'll drag this on much farther since I feel like what you post keeps shifting just enough to keep the last thing consistent. It simply seems to me that you can find distaste in what she said, but that if it had any impact at all on the vote, the blame goes to only those (Republican) who were impacted, not her. And since they are the ones saying she "poisoned" the vote...

I think that an overwhelming percentage of the blame goes to anyone who changed his or her vote. I think that ultimately (to the extent that there's blame for the vote), the blame has to mostly go to the people who voted.

 

However, particularly in view of the fact that most people give credit to those congress members who can bridge gaps and get bipartisan support for important measures, I think that some of the blame should fall on her as well; however, that blame is "theoretical," unless we know of a particular congress member who changed his or her vote because of her. I think she made a very bad (even reckless) choice; I don't know if that choice had an impact on the vote, though I suspect it didn't. Next time, it might.

[Lobowolf]

Or to be succinct, for a change, I never meant to originally imply that Pelosi was the reason it didn't pass; I meant to imply that her comments were stupid and sure didn't help, and (assuming you want a bailout to pass) I wouldn't have her do it again.

 

In blackjack terms, I'd say it was about like seeing someone hit an 18 against a face card, bust, and then watching the dealer turn over a 20. The action didn't hurt; it just wasn't smart. And if I had a stake in the results, I wouldn't want him to do it again.

[PassedOut]

Pelosi's speech was poorly timed because it gave the republicans an opening to blame the democrats for the failure of the bailout legislation. In fact, hardly any republicans were on the floor to hear her speech, and no one seemed to be bothered by it at the time. (You can look it up.)

 

After the republican leadership failed to produce the votes to pass the legislation that the Bush administration had declared essential for the nation, Boehner made his comments to deflect some of the criticism that he knew was coming. He simply provided a talking point to take some of the spotlight from him and his leadership.

 

No problem. All politicians do that (and they make partisan speeches when the rest of us wish they would cool it).

 

Shadegg: GOP Leaders Made "stupid Claim" By Blaming Pelosi Speech

 

Republican Rep. John Shadegg said Tuesday that House Minority Leader John Boehner and other Republican leaders made a “stupid claim” by alleging that Nancy Pelosi’s speech changed any minds on the bailout.

Shadegg said that he doesn't know of a single GOP vote that shifted because of the speech.

 

On Monday evening, Rep. Darrell Issa (R-Calif.), a lead opponent of the bailout, told the Crypt that the notion was "nonsense" and mocked the possibility that a Republican would be shocked or offended by the partisan nature of a Democratic speech.

I think most folks realized that Boehner was lying and just laughed it off.

[Al_U_Card]

why not just do away with the capital gains tax?

Jimmy, no serious economist from which I read comments in the last few days took this idea seriously. There is just no reason why this should work. Eliminating capital gains tax doesn't mean that suddenly everybody invests into the mortgage marked or starts buying investment banks, and the liquidity problem gets solved. (And I read about this in a lot of different places.)

 

I would suggest that you subtract some economic credibility from whatever source you got that idea from, seriously.

arend, there are economists who do say that eliminating the cgt would result in much more money in the markets... nobody posting here has the expertise to say it would do no good, imo

Back in the '80's Brian Baloney and the Conservatives had a CGT freebie to get rid of our tax dollars. It did nothing for the economy but helped a lot of his friends.

[cherdano]

why not just do away with the capital gains tax?

Jimmy, no serious economist from which I read comments in the last few days took this idea seriously. There is just no reason why this should work. Eliminating capital gains tax doesn't mean that suddenly everybody invests into the mortgage marked or starts buying investment banks, and the liquidity problem gets solved. (And I read about this in a lot of different places.)

 

I would suggest that you subtract some economic credibility from whatever source you got that idea from, seriously.

arend, there are economists who do say that eliminating the cgt would result in much more money in the markets... nobody posting here has the expertise to say it would do no good, imo

Given that I haven't come across any of them, I think it is fair to assume that they are in a small minority. (Could you point link me to one of them, btw?) This should be enough of a reason to be a little more skeptical about their claims.

 

The attitude "none of us has the expertise to judge this, and there are some who call themselves 'economist' on either side of the issue" is non-productive, it is the same attitude that would lead one to conclude "There is no way to tell whether global warming is happening, there are "experts" on either side of this issue".

Everybody should try to make educated guesses which of the economists are right. Given that there seems to be a huge majority on one side of the issue, this should be an easy guess.