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Stimulus Package Response

 

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Male_user johngflynn657 5 posts

It is very clear that many people do not understand what has happened in the last 2 years. Which is not difficult to realize considering that even those who made the products at the source of the problems do not understand it also or if they do, need to be prosecuted for any number of relevant crimes (fraud, failure to perform due diligence in the performance, false and misleading representation and many other possible crimes). But once the processes blew up, the only “privatlån”:http://bank-i-danmark.dk/ source of stability was/is the government. And considering how well the government can perform, that should be enough in itself to frighten people into understanding just how much damage a small group of people did. And then to reward that same small group by giving them bonuses….

 
Bop_bronze_seal BOPRecruiter 9 posts

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Male_user Jon 52 posts

Just a note…If you are not in a position of custody within a corrections agency, I recommend that you immediately do so…there will be no more room for program staff in a correctional facility…The current group of corrections administrators are of the same mindset as that of the “elected” government officials…“Put em behind bars until their time is up…” No programs for these guys…

So get into uniform and be prepared to deal with a bunch of guys who have nothing to do or nothing to look forward to except how to screw with you when you come on duty… So much for stimulus…

 
Male_user OCCD 57 posts

This is one of the most socailistic societies in history. Especially since the late 50’s. That is when corporate and governmental interests began to merge. Eisenhower warned us of this in his last speech. Don’t believe me? Try to start a car company, drill for oil, sell cars or firearms, manage a bank, etc. Very difficult, very highly regulated, no margin for error. Nurses spend 70% of their time pushing meds and doing paperwork. Not nursing. And government takes more and more control of more and more everyday activities. EVERYBODY demands a safety net. NOBODY wants to pay for it. So taxes increase and disappear into that swamp known as the “general fund.” We are anation of whiners. And we deserve to subsidize stupidity as our government begins to resemble France or Italy. Who cares if we have sold our grandchildren (typically about twenty to thirty years in the future,) into abject poverty with a marginal tax rate which rivals England? Most of us will be dead by then. And,. after all, WE GOT OURS. Most believe that that is all that matters. So give me my XBOX and my IPHONE and my new HONDA and a bigger HOUSE and fork them over now! Because the world owes me a living, right???

 
Male_user Jon 52 posts

charst, with all due respect, you have engaged in a behavior simply serving to further totalitarian approaches to government: labeling these periods as somehow being unbridled capitalism. I assure you and all other readers of this forum…the world has never truly experienced anything like unbridled capitalism. Ms. Rand, Greenspan, Friedman, and any other person subscribing to a pure objectivist philosophy were opposed to all forms of totalitarian states, as were our Founding Fathers. Indeed, the world of self-government envisioned by the writers of our Constitution and Declaration of Independence can only be achieved in an unbridled capitalistic system.

You mention that people do not work in their own best interest in capitalist systems???…If this is the case, then I would ask you serve up a picture of a system in which they would…I will take my swings at that. First, I submit the only person capable of judging one’s own self-interest would be that individual.

 
Male_user charst46 24 posts

Jon,

Yes, you are correct: it was more than just simply a public works project. However, what was produced? Nothing but massive amounts of destruction. Nothing productive was created, but the vast majority of professionals and lay agree, it ended the depression era. The public debt rose to unprecendented levels. No investment in industry was made….

As for Ayn Rand, the world saw what unbridled capitalism brought the world. The period in the United Kingdom from approximately 1810 to 1850 was capitalism without restriction. The same almost occured here in the 1870-1890’s. Not pleasant at all. Ms Rand had an axe to grind against Stalinist Russian. Even her brightest accolyte now acknowledges that people in capitalist systems do not work in their own self interest. Greenspan banked on that; we are paying for that blind belief.

 
Male_user Jon 52 posts

If anyone really wants to know why the current situation is happening, I simply refer them to the book, “Atlas Shrugged,” written by Ayn Rand. There, you will find the current world (including piracy and terrorism) described in great detail.

“…World War II is cited as the reason for getting the US out of the Depression, but people need to realize that WWII was the largest public works program in the history of the world. " I am sorry charst46, I cannot bring myself to equate the killing of 50 million people to that of a public works project. I mean, explosives are a much faster way to bring down buildings and level ground than bulldozers and graders (plus you do not need to pay the operators), but the side effects are lethal.

 
Male_user Spanke 2 posts

charst46 – you’re very knowledgeable and have responded in a very astute and comprehensive manner. I applaud your frankness and objectivity in this time of frustration and fear. Good work.

 
Male_user charst46 24 posts

Naw, go BEARS…..

I understand the frustration of seeing money being spent to support businesses and organizations that recklessly got the nation into the current situation. Our (and this really describes the system around the world, if this is taken as a general model….like Corrections Academies describe the particular system in general, each facility will be different) financial system is composed of the very visible, banks, and the not so visible, the shadow banking system. For a majority of Americans, the local bank, that bank’s relationship to larger regional banks and the Federal Reserve System handles 100% of their needs. It is what we know and work with.

However, for large corporations and wealthy individuals, this system does not work. That system is too cumbersome: slow, too many requirements, and other ‘economic deadweight’. So a secondary system works. In this ‘shadow’ system, firms create ways to borrow money, lend money, develop means of protecting against losses from investments and other necessary transactions. As economic systems mature, these latter functions become more important. Parallel to this shadow systems development and a partial reason for its creation is the need for higher returns. The need for higher returns is to offset the prospect of losses incurred from doing business or investing (such as new factories, new product lines, new financial instruments). All of this is unregulated which generally means there is no requirement for listing exactly what is being loaned to who, what kind of financial instrument is being made, and where the transactions are occuring.

The lack of transparency relates directly to why these markets exist. The traditional system is too cumbersome and slow. This is particularly true in the age of the internet…..but it is also the problem. When the ‘sub-prime’ market collapsed (and actually, only a small number of those loans failed, a majority of those loans were being paid by people who otherwise would never had the chance to own a home), the monthly payments those people made disappeared. Those monthly payments (flows) are what companies like Countrywide then ‘repackaged’ (grouped together to sell to a third party) and sold as an asset. What was a liability was sold as an asset. This possibility was created by a re-writting of laws in the Reagan, Bush I, Clinton and Bush II administrations. This dismantled the a lot of the banking regulatory process created after the 1929 Crash.

Those companies which bought these repackaged loans also bought insurance policies against a possible default (Credit Default Obligations-CDO’s). These CDO’s also had monthly or quarterly or yearly payments associated with them. These were then repackaged and sold as assets. Another layer of financial instruments was created to take advantage of the opportunity to earn money. So when a small portion of the initial underlying system failed, it led to a cascading effect and other failures. The problem for those of us on the street corner down on Main Street is that when this shadow system fails, it creates fear. This fear is based on the fact that there is no ‘transparency’ in the system: who owns what, to whom is any money owed and how much has been obligated.

When that fear runs rampant, banks do not loan money (looking at the balance sheets of large banks today, April 20, 2009 you will see that those banks have large amounts of money) to any one unless it is at a high rate of interest. Basically, money disappears.

Again, those of us on main street do not feel these effects until later on in the process. This latter stage occurs because people who have invested in the stock market see their wealth disappear when the market collapses. The market collapses because when the shadow system starts to fail, companies and people need money to pay off obligations or to fill the void created by companies, institutions or individuals make when they fail to pay. The only way to get money is to sell assets: stocks and bonds, subsidiaries that are earning a profit, and similar transactions. And being relatively clever, the first to be sold are the marginally profitable (why sell the gold and diamonds, when rubies will work). However, as more of these assets hit the market, their price goes down making the amount of money to be gained from their selling much less. This in turn, leads to selling more valueable assets which face the same pressure, more on the market means less to be made, which leads to a downward spiral.

In turn, people seeing the value of their 401(k)’s, for example, decline drastically, stop buying goods or start buying cheaper goods. This leads to an increase in inventories at retail stores which stop buying from wholesalers who in turn stop buying from manufacturers. Faced with this decline in sales, all the ‘agents’ in the supply chain lay-off people. This inturn, reduces the number of people who can buy goods. Which leads to a further reduction in sales (demand) which leads to further lay-offs and the spiral continues. This is where it really impacts those of us on the street corner on main street.

Those of us who work in corrections work for state agencies which receive funding from taxes: federal (transfered back to us via grants and other means), state (directly as the annual budget) and local taxes. The budget is generally created via the legislative process. But the legislature will receive input from the administrative branch which gets its information from each agency. And an agency, will be looking ‘down the road’ at what the agency expects its costs to be in two or three years, modifying it for the year that budget is actuall proposed. The state administration will look at projected revenues and the costs of operations from the agencies and submit the budget to the legislature. The legislature follows the same process (most legislatures have a mirror budget analysis process-balance of power in order to maintain honesty in the system). After a contentious session, the budget gets passed and life goes on. However, in a period of declining revenue, cuts need to be made (particularly in those states that insist on a balanced budget). That is when we in corrections get stressed out the most: who is going to get ‘layed off’.

The Federal Government is not burdened with this balanced budget requirement. In times of financial distress, the Federal Government can run deficits by filling in the gap created by the decline in spending. The Fed can build roads, buy new fiberglass cabling, and a host of other goods and services to stimulate the economy. This is where a loan analogy can help explain the process. I go buy a house. I do not have all the money needed. I do have some and the bank is willing to loan me the money. I buy the house. Construction workers are hired, plumbers hired, electricians are hired, and a host of others. I repay the money over time. Obviously the catch here is the payback. It has to be done. In the case of the Fed, it means that a few years from now, we are going to pay more in taxes. Generally this is the case. But the pain we avoid now is offset by our ability to be better able to withstand it later (no free lunches). By stimulating the economy now, far fewer people are put out of work and that has very positive effects on everyone.

To really understand why this particular (the ‘recession’ which began in 2007) is so bad, consider this. In 1980, financial services and the financial sector accounted for approximately 5% of our national income (GDP). In 2006, that sector had grown to 40%. The only other time the United States saw a similar relationship was in the 1920’s. And the economic turmoil created then started in the same sectors: real estate and finance, financial instruments created in an unregulated market to support real estate purchases and development.

I understand this response took a lot of space on the servers at Corrections.Com, but I think that a complete response is needed. I tried as much as is possible to avoid any non-main stream explanations as is possible ( I believe I provided a completely mainstream explanation).

Again,

GO BEARS!!

 
Male_user Dave simpson 6 posts

I really think we should add another 5 trillion to the budget. Go Steelers!!!!!!!!!

 
Male_user charst46 24 posts

It is very clear that many people do not understand what has happened in the last 2 years. Which is not difficult to realize considering that even those who made the products at the source of the problems do not understand it also or if they do, need to be prosecuted for any number of relevant crimes (fraud, failure to perform due diligence in the performance, false and misleading representation and many other possible crimes). But once the processes blew up, the only source of stability was/is the government. And considering how well the government can perform, that should be enough in itself to frighten people into understanding just how much damage a small group of people did. And then to reward that same small group by giving them bonuses….

As for spending the country out of recession, as much as many do not like the idea, it does work. When the idea was first applied, unemployment was at 25%. Two years later it was just under 15%. That is a 10% decline; the current unemployment rate is less than that (8.1% as of 4/1/09). Congress and the President panicked at the size of the deficits and reduced spending sending unemployment and the GDP in the wrong directions again. World War II is cited as the reason for getting the US out of the Depression, but people need to realize that WWII was the largest public works program in the history of the world. It was not private industry that invested in inventory and manufacturing processes, it was the United States Government spending money that did that.

It worked. The world’s largest deficits up to that time pulled the US out of the Depression.

So it is possible for a country to spend its way out of a recession. And the country had relatively mild fluctuations in the GDP afterwards. It was only after the dismantling of those controls that the country started returning to the rapid panics seen in the late 1800’s and early 1900’s. And it did not take to long for that to occurr. Controls removed in the mid to late 1990’s; first speculative boom and panic: 1999-2000. Second 2007-2009 and it is not over yet.

 
Male_user corrections.... 8 posts

A little while back we asked if anyone in corrections had read the stimulus package. We got a passionate response from user Ecnal:

"the people who voted on this obviously didn’t read it, i.e. AIG bonuses. And they don’t realize that you can’t spend your way out of a recession. And they don’t realize that you really ought not borrow more money than you can pay back."



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