Lincoln vs Cadillac Forums

(This is the forums archive - If you want to get back to the main site simply click the banner above and you will be taken to our homepage.)

Lincoln vs Cadillac Forums is the Ultimate Online Resource for Owners and Enthusiasts of American Luxury Cars. Feel free to browse through our archive - but make sure you make it back to our main site - Lincoln vs Cadillac Forums

Cadillac XLR : Cadillac CTS : Cadillac : 2005 Cadillac STS : Cadillac Forums : 2000 Lincoln LS : Lincoln Mark VIII : Lincoln Mark VII : Car Wax
Lincoln Town Car : Lincoln Air Suspension : Lincoln Continental : Lemon Law : Do It Yourself Car Repair : Lincoln vs Cadillac Forums : Mesothelioma

Back to the Archive Main Page

Pages: 1

Do candidates know anything about economics?

(Click here to view the original thread with full colors/images)

Posted by: fossten

Dom Armentano: Do candidates know anything about economics?

Every American, from the top Fortune 500 CEO to the youthful fast-food hamburger flipper, owes his standard of living — the highest in the world — to free-market capitalism. It’s capitalism — private property and free markets — that provides the information and the incentive that allows each of us to maximize the value of our economic activity.

Yet to hear the (mostly) Democratic presidential candidates tell it, free markets are faulty, unfair, and inherently unstable; indeed, government should constantly regulate markets and ride to the rescue whenever recession threatens.

The overall economic ignorance displayed in this year’s political campaign is staggering. For example, Hillary Clinton has said that she personally intends to “manage the economy” not understanding, apparently, that the “economy” is simply a metaphor for the billions of individual decisions made every day that no one person could ever “manage.”

Recently, all of the Democratic candidates, several of the Republicans and President Bush have advocated various economic “stimulus” programs (including rebate checks in the mail) not understanding, apparently, that any one-time spending shot (with borrowed money) will fix precisely nothing. (Lower tax rates, both individual and corporate, would be helpful, however.)

And finally, several of the candidates want a short-run moratorium on millions of impending mortgage foreclosures not understanding, apparently, that breaching contractual agreements and postponing the economically inevitable is not necessarily a smart thing.

The most significant area of economic ignorance, of course, is with respect to the Federal Reserve policy. All of the candidates, both Democratic and Republican (except Ron Paul) have applauded the Central Bank’s recent decision to dramatically lower the federal funds target rate to 3.5 percent; it may even be pushed lower. (The federal funds rate is the rate at which banks lend to other banks.)

To accomplish this reduction will require massive purchases of government securities by the Federal Reserve Open Market Committee which, in turn, will make mountains of new liquidity available to potential individual and institutional borrowers both here and abroad.

Now this is a good thing, right? Wrong.

During deep recession with high unemployment and significant idle industrial capacity, some economists (not me) would advocate an aggressive “easy money” policy to jump-start the economy. That is emphatically not the current situation. Additional liquidity from the Federal Reserve now would serve only to prop up tottering malinvestments (mostly in housing and finance) that are themselves the creature of the last Federal Reserve money bubble. Further, additional liquidity will give rise (at the margin) to additional malinvestments that themselves will never be completed due to a dearth of real savings.

Were all of the candidates asleep during the “business cycle” lecture in Economics 101?

Further, any new aggressive easy money policy will only further weaken the value of the dollar and eventually lead to more price inflation. In my last op-ed (“Darkening Clouds,” Dec. 4) I predicted that the Fed dare not push interest rates much lower since it risked destroying the dollar — the world’s reserve currency — and dollar investments both at home and abroad.

Well, I obviously underestimated the recklessness of Federal Reserve Chairman Ben Bernanke and the rest of the gang on the Open Market Committee. To save Wall Street speculators and influential financial institutions (that took absurd risks), the Fed now appears willing to drive the real rate of interest (rates adjusted for inflation) to near zero. If that doesn’t deepen and aggravate all of the ongoing economic distortions already in place, I don’t know what will.

In conventional terms, the only thing worse than a recession in the U.S. would be world-wide inflationary recession. Well, the Fed has now set us up for exactly that dismal scenario.

As Bette Davis growled in “All About Eve”: “Fasten your seat belts; it’s going to be a bumpy ride.”

Armentano is professor emeritus in economics at the University of Hartford. He lives in Vero Beach.

Posted by: Jayce 1971

I'm sorry for the people that are having their homes forclosed on. I think that it is very sad. I have a variable rate on my home loan, but my rate reflects the current fed rate, so I'm making less of a payment than I was the last 2 yrs, not more. I guess I don't understand when people got these mortgages of say $300,000 with a payment of say $700/ month, this didn't raise any little flags? People didn't stop and think, "Ugh, honey, what does 700/mo X 30 yrs equal?" "Is it our loan and compounded intrest?" WTF? Did people not read the contracts? I guess I just don't understand WHY someone would enter into a contract with a Huge balloon payment, then blame the government for their own mess...Oh wait, it's the American way...my bad.

Posted by: fossten

It's like these Kia ads you hear on the radio. "Two cars for $222!" Today I listened for the rapidspeak disclaimer on the way to work - "eighty-four months!" Who the F thinks they're gonna still be driving their stupid little Kias in SEVEN YEARS?

Posted by: Jayce 1971

The Kia's will depriciate faster than the loan payments. But, It's still a hell of a lot more ecomonical than owning a Lincoln! LOL

Posted by: fossten

Quote:

Originally Posted by Jayce 1971

The Kia's will depriciate faster than the loan payments. But, It's still a hell of a lot more ecomonical than owning a Lincoln! LOL

At first glance, maybe, but I'm driving a '93 Mark that I bought in 2001 that's paid for, and even though I've put money into it, it's still much cheaper than any new car I could ever buy at this point. And for equal performance, I couldn't afford anything new that would come close.

Posted by: 97stscaddy

I hear similar ads all the time here.

Its not just the presidential candidates that fail to present any knowledge about the economy. Most of the United States is guilty of ignorance, or down right stupidity, when it comes to economics.

Politicians for the most part DO know a fair amount about the economy, but when they're campaigning for votes, they'll offer up what ever it is that the myrmidons want. Regardless of the consequences.

Posted by: fossten

Quote:

Originally Posted by 97stscaddy

I hear similar ads all the time here.

Its not just the presidential candidates that fail to present any knowledge about the economy. Most of the United States is guilty of ignorance, or down right stupidity, when it comes to economics.

Politicians for the most part DO know a fair amount about the economy, but when they're campaigning for votes, they'll offer up what ever it is that the myrmidons want. Regardless of the consequences.

This is my Myrmidon.