I don't know much about economics, but isn't the US the king of debt?
No. Not even close. The US has a very low debt/GDP ratio.
Hasn't the US survived on debt, both as a country and as individuals?
The question isn't well framed, and difficult to answer without going to great and tedious length.
Isn't that how the government works, go way into debt and then go to war to pay it off?
No. According to "Keynsian economics" there is a right time and a wrong time for governments to acquire debt.
War typically leads to more debt, rather than the reverse. "Typically" is probably too weak. Offhand I can't think of any exceptions which don't involve seizing assets, something which doesn't really occur in the modern world.
In fact, one of the reasons the US annual budget deficit rose so much is because the Iraq war debt, which was originally "accounted" for as a "special, non-budget" expense, went "on the books" in 2009/2010.
Hasn't the US allowed banks to give people who can't afford it loans left and right for decades? (Back in the 70s when I was married, you could get a mortgage for about 2 percent of your house's value here in Italy. I call that cautious.).
No. Real estate loan credit requirements became very loose during the "bubble" period from around 2001 'til 2008 (when the bubble burst and credit contracted). Those lax requirements were partly the result of an administration which considered a rise in home ownership rates as one of its metrics of success; but mostly as a result of greed and stupidity in the insurance, securities, and banking industries; and not just in the US.
I'm not sure what point you're making about Italian banks. Italian banks have almost no liquidity compared to debt, and the entire Italian banking industry was (or maybe still is) on the verge of systemic and catastrophic failure. As a result, it seems likely that Italy (as well as some of the other weaker EU players) will be forced to institute "austerity" measures which will keep it in recession for a long, long time.
I had to wait years to get a credit card, and had to prove a reasonable income first. College kids in the US get sent several credit cards each, which they don;t even have to ask for, already functional, so they can go into debt right away and learn the american way. Then the credit card company is allowed to increase the interest at will! Changing a contract mid stream. That's even legal! (Who let THAT law go through i wonder, and who paid their campaign expenses?)
The bank/credit industry does a lot of lobbying. They spend a lot of money to make things come out their way. Both US parties have a lousy record in this respect. It's easier to point to the people who stood against it than to those who actively assisted.
Pay people less and then make it easy for them to go into debt. Good economics.
If you're saying easy credit increases personal debt, you're right. And?
Cut their benefits and make them happy they don;t have to pay more taxes, deftly hiding the fact that the people cutting their benefits are the ones who should be paying the extra taxes, not them. Good economics.
Sentences without definite subjects confuse me, but I do get what you're saying. The poor simply can't be punished enough, while the rich require continuous rewards in order to enjoy their wealth. Nothing is hidden deftly, or hidden at all unless you count transparent lies as "hiding." People believe what they want to believe because they want to believe it. That's human nature, not economics.
Bail out the banks and demand nothing in return. That's supposed to be a "free market economy" - isn't that sort of a form of welfare for banks?
If the US government hadn't "bailed out the banks," the global credit crisis would have been far, far worse than it was. I don't think "free market economy" applies. Our economy, including the financial industry, has enjoyed a fair degree of regulation since the Great Depression.
In a "free market economy" i thought that if your company was failing and some other company had the money to bail you out, they would also expect to have controlling shares in the company. The government could have said, "ok, we bail you out, but you are ours!" How many whiny banks would have gone to mama government then?
We don't have a completely "free market economy," but we do have a constitutional form of government. The executive branch could and cannot nationalize the banks. Congress could have passed laws making government aid more costly and consequential, but did not do so. Had the US government not acted decisively and immediately to save the banks the global economic system would quite likely have failed and the entire world been thrown into massive depression.
Unlike you, I wish they'd done more in the line of "bail outs," for instance saving Lehman. Like you, I would have liked more and better regulation; would have liked the government to pick up more of the bad paper (to hasten the speed of recovery); would have liked a bigger stimulus package more directly targeted at infrastructure, etc., etc.
You probably would have been happier with my solutions than with those provided by the people who actually made and make policy. But we don't have me, we have the government we elected.
But i guess i don't know anything about economics.
Because you're cursed with intelligence, good sense and a good heart there are a lot of things governments do which won't make sense.
This has been an enjoyable thread, it would be a shame if it got shut down for "politics."
BDL
Edited by boar_d_laze - 12/6/11 at 11:30am
