US response to financial crisis in 2008

[MarkA]

How would the US react to the current financial crisis if the USSR still existed or if China had not embarked on economic liberalisation?

Would any form of massive government intervention by the US be seen as an admission of the failure of capitalism? Some commentators are saying this now, but could the administration, no matter who was in the White House, bring themselves to bail out the system by using the methods proposed by the legislature and executive branches at present?

On a different point, if the USSR did not exist in 1929 would the US have acted differently to the Wall St Crash instead of the inaction of the president and the introduction of tariff barriers by the congress?

 

[Mark E.]

If the Soviet Union still existed, the US military-industrial complex would have different very different economic priorities. If China did not supply the US with so many consumer goods, American manufacturing would be more active. Both situations, through a butterfly effect, would make the economic crisis of 2008 much, much less likely.

As for 1929, the US was so independent-minded and the USSR too new and unassertive to be a threat, that I do not think there would be any different reaction without the Soviets.

 

[Faeelin]

Why would it matter? This is nothing compared to the New Deal.

 

[Stonewall's Lightning]

If the Soviet Union still existed, the US military-industrial complex would have different very different economic priorities. If China did not supply the US with so many consumer goods, American manufacturing would be more active. Both situations, through a butterfly effect, would make the economic crisis of 2008 much, much less likely.

As for 1929, the US was so independent-minded and the USSR too new and unassertive to be a threat, that I do not think there would be any different reaction without the Soviets.

Right, without most of the liberalization of the PRC's economy, the USA would not have Trillions of dollars in debt to China. Debt with some heavy interest. Alot of manufacturing jobs would still be in U.S.

The USA would still have to produce weapons and military supplies to outpace or atleast match the Soviets. More manufacturing jobs and a larger military.

Actually, many feel that the current economic crisis was the result of too much government regulations. With several of the following issues.

1.Too high corporate industrial tax(2nd highest in the world, 1st Japan). A big reasons so many American companies have left to China and other places. I would not want to pay 35-40% in taxes either. China and other nations have no or very low Corporate/industrial taxes.

2. Too high of a capital gains tax. Need to lower or drop this tax to encourage investments, not punish it.

3. Very high income tax for the middle classes. Ex.. I pay 33% in federal income tax alone.

4. Very, Very, loose regulations for loaning money in the past 15 years..

 

[DrakonFin]

Actually, many feel that the current economic crisis was the result of too much government regulations. With several of the following issues.

1.Too high corporate industrial tax(2nd highest in the world, 1st Japan). A big reasons so many American companies have left to China and other places. I would not want to pay 35-40% in taxes either. China and other nations have no or very low Corporate/industrial taxes.

2. Too high of a capital gains tax. Need to lower or drop this tax to encourage investments, not punish it.

3. Very high income tax for the middle classes. Ex.. I pay 33% in federal income tax alone.

4. Very, Very, loose regulations for loaning money in the past 15 years..

So what you are saying is that the government is always to blame for economic trouble. Either it regulates too much or then it regulates too little, sometimes even doing both at the same time. Definitely see your point there, because we all know market economy can not end up in a crisis situation all by itself.

About taxes, in continental Europe, especially the Nordics, we have as high or higher taxes than in the US but the national economies are on the average arguably healthier than in America. Wouldn't you say, then, that what creates economic trouble might not only be related to how much you tax but also to how that money gained is used by the government?

 

[xchen08]

So what you are saying is that the government is always to blame for economic trouble. Either it regulates too much or then it regulates too little, sometimes even doing both at the same time. Definitely see your point there, because we all know market economy can not end up in a crisis situation all by itself.

About taxes, in continental Europe, especially the Nordics, we have as high or higher taxes than in the US but the national economies are on the average arguably healthier than in America. Wouldn't you say, then, that what creates economic trouble might not only be related to how much you tax but also to how that money gained is used by the government?

It's less how much you tax as how you tax. All taxes are have deadweight losses, but it is possible to design a tax system that has minimal distortions, something that the U.S. system definitely is not. This, in large part is due to a combination of the U.S.'s sheer size and democratic process. Small countries, with Singapore as a good example, can tailor their tax systems for maximum efficiency. Of course, sometimes, the distortions are intentional, such as the tax system favoring home ownership.

 

[ranoncles]

Right, without most of the liberalization of the PRC's economy, the USA would not have Trillions of dollars in debt to China. Debt with some heavy interest. Alot of manufacturing jobs would still be in U.S.

The USA would still have to produce weapons and military supplies to outpace or atleast match the Soviets. More manufacturing jobs and a larger military.

Actually, many feel that the current economic crisis was the result of too much government regulations. With several of the following issues.

1.Too high corporate industrial tax(2nd highest in the world, 1st Japan). A big reasons so many American companies have left to China and other places. I would not want to pay 35-40% in taxes either. China and other nations have no or very low Corporate/industrial taxes.

2. Too high of a capital gains tax. Need to lower or drop this tax to encourage investments, not punish it.

3. Very high income tax for the middle classes. Ex.. I pay 33% in federal income tax alone.

4. Very, Very, loose regulations for loaning money in the past 15 years..

Complete and utter bullshit.

I live in Europe and pay considerably more than your measly 33% income tax. Which is practically the lowest tax rate category here, by the way. So much for your "very high income tax".

This entire crisis has nothing to do with tax burdens. Bankers simply got greedy and started peddling products any half-wit could have known would never make any money.

More (and better) government regulations would have prevented this, as is proven in Europe. And why everybody in the world is calling for stricter regulations to reign in those American cowboys who created this mess and are now running for the hills with the bail out money.

 

[Blochead]

How would the US react to the current financial crisis if the USSR still existed or if China had not embarked on economic liberalisation?

Frankly I don't think the current financial crisis would exist. There would be either no crisis, a different crisis, or an earlier crisis, but certainly not anything resembling our crisis.

If we still have the USSR, then we probably have a very different economic policy than that which occurred in the '90s under Clinton, which could afford to prioritize the national budget over the Pentagon budget.

Then you have to account for all the major butterflies to the '97-'98 Asian financial crisis which some say created the imbalances that set up 2008.

It's also worth considering that a liberalized China plays an enormous role not just in international trade, but in propping up the US budget deficit. With no liberalized China, American fiscal and monetary policy will likely be very different, and thus I'm not sure if we could compare the 2008 crisis to the ATL crisis at all.

 

[Stonewall's Lightning]

Complete and utter bullshit.

I live in Europe and pay considerably more than your measly 33% income tax. Which is practically the lowest tax rate category here, by the way. So much for your "very high income tax".

This entire crisis has nothing to do with tax burdens. Bankers simply got greedy and started peddling products any half-wit could have known would never make any money.

More (and better) government regulations would have prevented this, as is proven in Europe. And why everybody in the world is calling for stricter regulations to reign in those American cowboys who created this mess and are now running for the hills with the bail out money.

Why the attack?

Not sure what is with your hostile response, but anyway. Not sure if you understood what I really wrote. American and Europe are two different places, with different dynamics.

Honestly you have no idea of what you are talking about. I have no knowledge of most European tax laws, but I know alot about American ones.

33% percent is federal income tax alone(that is what I pay) many people pay more, many states also have an income tax. I live in a state with high state income taxes. On top of that there are local taxes on property and some locations have a local income tax.

Then there are sales taxes too, that can vary greatly. All of this can figure to nearly 60% of every dollar earned in taxes.

In the U.S there is alot of people who do not income taxes. The very wealthy can always find a way around these taxes, also the very poor pay little or none at all. The middle class gets hit very hard.

We also have a serious problem with alot of untaxed labor. More then Europeans tend to realize. Yes, a great deal with the massive illegal immigration problem. But that is another subject.

Alot of U.S companies have left this country because of high taxes to their producion cost. Lowering could encourage some of these companies to return. People could have many of their former jobs back.

Now, for Government regulations, if you understood how things work here, are what got the U.S in trouble in the first place. Government regualtions and there are many here, dictate a great deal. Interest rates(do you now what that is)? Also tax rates for companies, Massive spending more then what is allowed for by budget. It was the governemnt that really screwed this.

The federal government also encouraged banks to loan people in many cases %120 percent of their normal credit allowed to buy a house that they could not afford otherwise, not to mention adjustable rates of interest.

So please lets not compare the European(not sure which country) and the U.S sytems they are very different, with alot of different factors

 

[Stonewall's Lightning]

So what you are saying is that the government is always to blame for economic trouble. Either it regulates too much or then it regulates too little, sometimes even doing both at the same time. Definitely see your point there, because we all know market economy can not end up in a crisis situation all by itself.

About taxes, in continental Europe, especially the Nordics, we have as high or higher taxes than in the US but the national economies are on the average arguably healthier than in America. Wouldn't you say, then, that what creates economic trouble might not only be related to how much you tax but also to how that money gained is used by the government?

Yes, they way that it is spent is very important. Often times in the U.S the federal budget will exceed what takes in from sources. Calculate this over spending, massive trade debt, terrible money loaning practices, massive inflation, and eventually it will come back to hurt the economy. Not to mention a steady or lowering of wages while living costs go higher.

The government and market work with eachother, but the problem is that this time both got out of control.

 

[Mark E.]

Much of the problem relates to the inflated price of housing. Historically, the inflation-adjusted price of real estate follows up-down cycles, creeping upward over the decades because the features of the home improve.

Now look what happened after 2001. At some point, the average home becomes unaffordable to many, unless the underlying inflation rate takes off to dilute the debt. And since 2001, it did not.

 

[Stonewall's Lightning]

Much of the problem relates to the inflated price of housing. Historically, the inflation-adjusted price of real estate follows up-down cycles, creeping upward over the decades because the features of the home improve.

Now look what happened after 2001. At some point, the average home becomes unaffordable to many, unless the underlying inflation rate takes off to dilute the debt. And since 2001, it did not.

The housing bubble has come down some, but still is very hard for a middle income family to afford one. They would have to live far from the city's center to afford housing.

 

[Mark E.]

The housing bubble has come down some, but still is very hard for a middle income family to afford one. They would have to live far from the city's center to afford housing.

Part of the problem is that many builders (and buyers) do not want to renovate older homes near the centers of cities. The American Dream is for a suburban home with a large yard and on a dead end street, utterly inaccessible by any means other than the automobile.

What few people address is what happens when the bubble pops; or in other words, the other shoe falls. I am talking about a fuel crisis, far worse than any we saw in mid-2008. The scenarios are many: storm on the gulf coast, and earthquake north of Memphis, interruption of foreign supplies.

As a society, we Americans are very ill-prepared for a severe economic crisis.

 

[Berra]

Am I to paranoid if I suggest the alternative to the bailout the Chinese taking over the banks?

 

[Stonewall's Lightning]

Am I to paranoid if I suggest the alternative to the bailout the Chinese taking over the banks?

Yikes, Parrish the thought!!