7 ms·

Partisan Divide Over Economic Outlook Worries Ben Bernanke

28 points by jonwachob91 10y ago

rodionos 10y ago
Quote from him ca 2006 - we haven't seen a nationwide housing bubble. Predicting is hard, even if you have tons of data. Greenspan used to take long hot baths (according to his book I read) to finalize the estimates. Guess what, he was really good at it.
- ptaipale 10y ago
  Alan Greenspan, you mean?
  - rodionos 10y ago
    Yes, Alan Greenspan, the former fed chairman. Just a typo.
- jonwachob91 10y ago
  He said the same thing in his book "Courage to Act". I genuinely believed it until I read "The Short". You didn't have to have tons of data to predict the bubble, you just had to take the time to read the loans. Everyone saw this bubble long before Bernanke did.
  - wozniacki 10y ago
    I genuinely believed it until I read "The Short" You mean Michael Lewis' "The Big Short: Inside the Doomsday Machine"? [1] [1] http://www.goodreads.com/book/show/26889576-the-big-short http://www.goodreads.com/book/show/26889576-the-big-short
  - bryanlarsen 10y ago
    Everybody saw the bubble, it made the cover of the Economist many times in the 4 years before the crash. The hard part is predicting when and how it would pop, and nobody could do that. Tons of people lost their shirts shorting against the bubble. They weren't wrong, just early. "The market can stay irrational longer than you can stay solvent" - Keynes The how was important -- everybody acknowledged that the market was in a bubble, but many people predicted that it wouldn't pop catastrophically as it did.
    - justinzollars 10y ago
      found it! http://www.economist.com/node/4079027 http://www.economist.com/node/4079027 they def called that one. "Interest-only loans"
tray5 10y ago
It's impossible for economic policy to not be politicized. Look around the world, all political parties are distinctly grouped by their economic beliefs. If anything, the US political landscape needs to be more far more political on the economy. Differentiating republicans and democrats on their economic policies is almost impossible. Especially compared to literally every other country (excluding dictatorships). This almost identical belief about the economy has made an incredibly toxic and arbitrary system where people misplace their anger at each other because they have not been educated on what the true source of their anger is or what their alternatives are! It's made an ugly tribal political system where it's us vs them.
- Consultant32452 10y ago
  I agree. The economic policies of Democrats and Republicans is really indistinguishable from Goldman Sachs economic policy.
  - justinzollars 10y ago
    Thats why I own GS stock!
    - Consultant32452 10y ago
      That's why I own a prepper bunker!
  - jevgeni 10y ago
    Private enterprises don't have economic policies.
    - Consultant32452 10y ago
      You don't think private enterprises lobby for economic policy? Maybe you're just making an argument about wording?
      - 10y ago
pjmorris 10y ago
Bernanke made the choice to resolve bad housing loans by handing out trillions (through the purchase of mortgage-backed securities) to the lenders instead of the borrowers. I think his analysis would be improved if he recognized that was a political decision, not just an economic one.
- jevgeni 10y ago
  Not handing out, but lending out. Bailing out households would be a far more political decision. The Fed could impose constraints on banks participating in TARP, to make sure the money gets paid back. The same wouldn't be possible to practically do with households.
  - maxerickson 10y ago
    In addition to the loans and direct investments in banks, there was a large asset purchase program: https://en.wikipedia.org/wiki/Public%E2%80%93Private_Investment_Program_for_Legacy_Assets https://en.wikipedia.org/wiki/Public%E2%80%93Private_Investm... It can be cost neutral by way of selling the assets back to the market, but that isn't happening at any sort of rapid clip. The Fed currently has ~$1.8 trillion of mortgage backed securities. https://fred.stlouisfed.org/series/MBST https://fred.stlouisfed.org/series/MBST The bailout targeted the entire economy. Imagine the pinch we'd be in if housing all of the sudden wasn't too expensive to buy (and thus not a glorious asset for all the people that have it).
    - jevgeni 10y ago
      Thank you for the insight! I haven't considered "sector targeting". 1.8 trillion USD MBS is a bit unsettling, I must say.
      - maxerickson 10y ago
        It's "only" about 12% of the market. https://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm https://www.federalreserve.gov/econresdata/releases/mortouts...
ue_ 10y ago
Economy has always been political, since thr discipline was founded as political economy, the part which modern economists have excised from their expertise. Good books on political economy include those by Ricardo, Smith, the excellent critique of political economy Capital by Marx and those books by Proudhon.
nzjrs 10y ago
I feel like no one here has read the article, and is just having their fun doing some character assassination. > “The election result completely reversed people’s views > of the state of the economy. Republicans who thought that > we were in a dystopia now think things look great, and > Democrats, the opposite. And it shows that it isn’t all > based on an objective assessment of the economy.” Seems a pretty salient and uncontroversial observation.
- maxxxxx 10y ago
  That's one thing that drives me crazy when I talk to people. When the other party does something they are outraged but when their own guy does it, it's suddenly OK. I guess the parties have achieved the final goal. People are not even capable of looking at a situation anymore and make up their mind. Instead they just blindly follow what they are being told.
  - Pigo 10y ago
    I believe in a quite majority that is perfectly capable of independent thought and self-awareness, but lacking news outlets they trust to give them anything but narrative. It could be the slow death of newspapers that led us here.
    - maxxxxx 10y ago
      The lack of newspapers they trust is just a consequence of political parties undermining that trust. You still can read the New York or Wall Street Journal and get enough information to form a reasonable opinion.
      - mythrwy 10y ago
        I disagree. Media seems to me to have gotten much more sensationalist and click baity over the last decade and often really stretches the facts in interests of agenda. To be fair maybe they feel this is necessary to survive in the face of the internet. Trust is hard to establish but only takes an instant to break.
makosdv 10y ago
He is correct in a way. As long as the government is trying to "control" the economy, it will be "politicized". The only way to not "politicize" the U.S. economy is to get rid of the Federal Reserve, etc.
jevgeni 10y ago
I feel a lot of commenters here don't differentiate between economics as subject of policy and economics as tool for politics.
dustingetz 10y ago
"To Mr. Bernanke, when the economy — as well as the basic statistics that undergird it — becomes politicized, the result is bad policy. “A lot of the emotion is not really susceptible to nuanced policy arguments,” he said, shaking his head." Not the same! He didn't say that!
bsaunder 10y ago
“You have to recognize realistically that A.I. is qualitatively different from an internal combustion engine in that it was always the case that human imagination, creativity, social interaction, those things were unique to humans and couldn’t be replicated by machines,” he said. “We are coming closer to the point where not only cashiers but surgeons might be at least partially replaced by A.I.” I think the politicians will finally get it when income tax revenues start eroding (maybe as soon as this year?). I'd expect this to force a pivot to a sales/transaction tax model. Hopefully (but I'm not optimistic) this is paired with a final capitulation on the necessity of a UBI.

28 points by jonwachob91 10y ago

Quote from him ca 2006 - we haven't seen a nationwide housing bubble. Predicting is hard, even if you have tons of data. Greenspan used to take long hot baths (according to his book I read) to finalize the estimates. Guess what, he was really good at it.

ptaipale 10y ago
Alan Greenspan, you mean?
- rodionos 10y ago
  Yes, Alan Greenspan, the former fed chairman. Just a typo.
jonwachob91 10y ago
He said the same thing in his book "Courage to Act". I genuinely believed it until I read "The Short". You didn't have to have tons of data to predict the bubble, you just had to take the time to read the loans. Everyone saw this bubble long before Bernanke did.
- wozniacki 10y ago
  I genuinely believed it until I read "The Short" You mean Michael Lewis' "The Big Short: Inside the Doomsday Machine"? [1] [1] http://www.goodreads.com/book/show/26889576-the-big-short http://www.goodreads.com/book/show/26889576-the-big-short
- bryanlarsen 10y ago
  Everybody saw the bubble, it made the cover of the Economist many times in the 4 years before the crash. The hard part is predicting when and how it would pop, and nobody could do that. Tons of people lost their shirts shorting against the bubble. They weren't wrong, just early. "The market can stay irrational longer than you can stay solvent" - Keynes The how was important -- everybody acknowledged that the market was in a bubble, but many people predicted that it wouldn't pop catastrophically as it did.
  - justinzollars 10y ago
    found it! http://www.economist.com/node/4079027 http://www.economist.com/node/4079027 they def called that one. "Interest-only loans"

tray5 10y ago

It's impossible for economic policy to not be politicized. Look around the world, all political parties are distinctly grouped by their economic beliefs. If anything, the US political landscape needs to be more far more political on the economy. Differentiating republicans and democrats on their economic policies is almost impossible. Especially compared to literally every other country (excluding dictatorships). This almost identical belief about the economy has made an incredibly toxic and arbitrary system where people misplace their anger at each other because they have not been educated on what the true source of their anger is or what their alternatives are! It's made an ugly tribal political system where it's us vs them.

Consultant32452 10y ago
I agree. The economic policies of Democrats and Republicans is really indistinguishable from Goldman Sachs economic policy.
- justinzollars 10y ago
  Thats why I own GS stock!
  - Consultant32452 10y ago
    That's why I own a prepper bunker!
- jevgeni 10y ago
  Private enterprises don't have economic policies.
  - Consultant32452 10y ago
    You don't think private enterprises lobby for economic policy? Maybe you're just making an argument about wording?
    - 10y ago

pjmorris 10y ago

Bernanke made the choice to resolve bad housing loans by handing out trillions (through the purchase of mortgage-backed securities) to the lenders instead of the borrowers. I think his analysis would be improved if he recognized that was a political decision, not just an economic one.

jevgeni 10y ago
Not handing out, but lending out. Bailing out households would be a far more political decision. The Fed could impose constraints on banks participating in TARP, to make sure the money gets paid back. The same wouldn't be possible to practically do with households.
- maxerickson 10y ago
  In addition to the loans and direct investments in banks, there was a large asset purchase program: https://en.wikipedia.org/wiki/Public%E2%80%93Private_Investment_Program_for_Legacy_Assets https://en.wikipedia.org/wiki/Public%E2%80%93Private_Investm... It can be cost neutral by way of selling the assets back to the market, but that isn't happening at any sort of rapid clip. The Fed currently has ~$1.8 trillion of mortgage backed securities. https://fred.stlouisfed.org/series/MBST https://fred.stlouisfed.org/series/MBST The bailout targeted the entire economy. Imagine the pinch we'd be in if housing all of the sudden wasn't too expensive to buy (and thus not a glorious asset for all the people that have it).
  - jevgeni 10y ago
    Thank you for the insight! I haven't considered "sector targeting". 1.8 trillion USD MBS is a bit unsettling, I must say.
    - maxerickson 10y ago
      It's "only" about 12% of the market. https://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm https://www.federalreserve.gov/econresdata/releases/mortouts...

ue_ 10y ago

Economy has always been political, since thr discipline was founded as political economy, the part which modern economists have excised from their expertise. Good books on political economy include those by Ricardo, Smith, the excellent critique of political economy Capital by Marx and those books by Proudhon.

nzjrs 10y ago

I feel like no one here has read the article, and is just having their fun doing some character assassination. > “The election result completely reversed people’s views > of the state of the economy. Republicans who thought that > we were in a dystopia now think things look great, and > Democrats, the opposite. And it shows that it isn’t all > based on an objective assessment of the economy.” Seems a pretty salient and uncontroversial observation.

maxxxxx 10y ago
That's one thing that drives me crazy when I talk to people. When the other party does something they are outraged but when their own guy does it, it's suddenly OK. I guess the parties have achieved the final goal. People are not even capable of looking at a situation anymore and make up their mind. Instead they just blindly follow what they are being told.
- Pigo 10y ago
  I believe in a quite majority that is perfectly capable of independent thought and self-awareness, but lacking news outlets they trust to give them anything but narrative. It could be the slow death of newspapers that led us here.
  - maxxxxx 10y ago
    The lack of newspapers they trust is just a consequence of political parties undermining that trust. You still can read the New York or Wall Street Journal and get enough information to form a reasonable opinion.
    - mythrwy 10y ago
      I disagree. Media seems to me to have gotten much more sensationalist and click baity over the last decade and often really stretches the facts in interests of agenda. To be fair maybe they feel this is necessary to survive in the face of the internet. Trust is hard to establish but only takes an instant to break.

makosdv 10y ago

He is correct in a way. As long as the government is trying to "control" the economy, it will be "politicized". The only way to not "politicize" the U.S. economy is to get rid of the Federal Reserve, etc.

jevgeni 10y ago

I feel a lot of commenters here don't differentiate between economics as subject of policy and economics as tool for politics.

dustingetz 10y ago

"To Mr. Bernanke, when the economy — as well as the basic statistics that undergird it — becomes politicized, the result is bad policy. “A lot of the emotion is not really susceptible to nuanced policy arguments,” he said, shaking his head." Not the same! He didn't say that!

bsaunder 10y ago

“You have to recognize realistically that A.I. is qualitatively different from an internal combustion engine in that it was always the case that human imagination, creativity, social interaction, those things were unique to humans and couldn’t be replicated by machines,” he said. “We are coming closer to the point where not only cashiers but surgeons might be at least partially replaced by A.I.” I think the politicians will finally get it when income tax revenues start eroding (maybe as soon as this year?). I'd expect this to force a pivot to a sales/transaction tax model. Hopefully (but I'm not optimistic) this is paired with a final capitulation on the necessity of a UBI.