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Originally Posted by 6satan6archist6
Well someone was insulting this guys intelligence and I think he defended very well and made some look incredibly stupid. That last post I put was the second time I posted it because someone deleted it. You might want to note that I never said anything about being banned. I was talking about the post getting deleted. Maybe you should read the whole thing before you speak, lest you look like an idiot.
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Perhaps you should reread what he wrote and notice that he has not included any sources or proof for any of his claims. This makes you look like an idiot for defending him.
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As for the macro-economy, having actually taken a college level class on it, here's a few things I feel like I need to point out:
1, A recession is defined as two consecutive quarters without growth in GDP, and is usually accompanied by large unemployment (greater than 6%). A depression is not an economic term, but it was coined at the time of the "Great Depression" to mean a very powerful recession. There is no concrete definition for an economic depression.
2, What is occurring now is also called a "bank run" or "bank panic" where banks are lacking liquidity (liquid money, i.e. cash) to give to people wishing to withdraw funds. Thus the banks are becoming "insolvent" or unable to pay their debts (to people withdrawing funds) due to the system of fractional-reserve banking. That is, when you deposit money to a bank, they loan out a large percentage of that money to people wanting a loan. The people taking the loan will pay it back with interest, giving the bank profit, and you your money back with a small portion of the profit (the money you get on your savings account). The cause of this crisis is there is a large amount of loans that were issued to people that were unlikely to repay their loans, and thus the bank can not let you withdraw your funds.
3, The Federal Reserve was put in place to control the supply of money. They are an independent institution aimed at regulating the economy in attempts to compensate for the business cycle. The business cycle is the pattern of recessions and growths of GDP over time. The Fed was put in place to try to make the cycle more smooth in order to prevent unemployment (recessions), and inflation (too much growth).
4, The solution to the current problem is an increase of the money supply from the Fed by using OMO (Open Market Operations - the buying of bonds in this case), and reducing the Discount Rate (which was previously done before this crisis - it is the rate at which Banks may loan money from the Fed to prevent Bank Panics). This "correct" solution to this problem is aimed at increasing the currency in the economy, so that the banks may pay its debts, restoring confidence in investment spending.
5, What is happening now is the legislative and executive branch are trying to pass expansionary fiscal policy in order to do the same thing as what the fed should be doing. This will create larger government however, unlike what monetary policy would do. This is why you should not be in favor of this $700 Billion bailout.
6. The difference here is that Monetary Policy, used by the Fed, is the increase of the money supply so that the banks may repay their debts does not spend taxpayer's dollars. Fiscal Policy is passed by the government which spends taxpayer's dollars and will be added to the public debt. There are many reasons why the Fed should be able to handle this without Congress, however it seems that politics (i.e. McCain) require action be done in Congress so that someone may take credit for this.
However, if you are a conspiracy theorist, you subscribe to the school of thought that "the Fed/Govt. formulated this crisis to make profit off of us" and therefore the Fed will not properly react, and you should be hoping to god they pass this bailout lest more banks go insolvent. Either way you're being robbed if you believe all of this.
And just as a disclaimer, I do not profess to be an expert of the economy (having only taken one class), this is just what I have been taught and hopefully am clarifying some of this to those of you who have never had a class on Macroeconomics. Some of the things that I have said may be wrong, so please do your own research.
P.S.: i have a certified genius IQ and am a member of mensa
i got a 1561 on my SAT when i was 12 years old (out of 1600)
and i got a 100 on the asvab when testing for the airforce (thats beyond a perfect score)
Thought you guys should know that.