back to article Why OH WHY is economics so bleedin' awful, then?

As Her Majesty the Queen remarked a few years back, why was it that no economist actually saw the crash coming? There's actually two answers to that. First, the cute one: that sort of violent change cannot be predicted. If it could be predicted then prices would move before it happened, meaning that it would have already …

Mushroom

There were many...

... who observed the credit bubble from the start of the millienium would lead to a crash.

Thing is though, it hasn't really happened yet...

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Anonymous Coward

Re: There were many...

People being offered unsecured loans they had no real prospect of paying back.

People being told to spend, spend, spend rather than save and if you don't any money? Then just borrow, borrow, borrow.

People being told that they *need* that 50" TV, they *need* the big car, they *need* the house full of electronic gizmos and they *need* it NOW. And if they can't afford it, well, then just borrow, borrow, borrow!!

What could possibly go wrong there?

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Re: There were many...

"Thing is though, it hasn't really happened yet..."

Don't worry. Internationally debt levels are rising - largely because although the private sector has pulled its belt in somewhat, governments continue to spend beyond their means. My suggestion is to keep an eye on China and Japan. At the moment nobody wants to lend to Japan given their bonkers level of national debt, so their central bank is printing the money to lend to itself. This can't end well.

China on the other hand, is about where Japan was back at the millennium. Vast amounts of debt financed property and infrastructure development that will go sour, and a rush of speculative lemmings into the stock market. We've seen this sooooo many times before that we know how this ends. You can fend off the inevitable for a while with yet more debt, but ultimately you end up like Spain or Greece - a bankrupt economy that has to endure five to fifteen years of stagnation and mass unemployment. I don't like the idea of mass unemployment in China any more than the Chinese Communist party, albeit for different if related reasons. But once you've wasted good money on bad investments, you can't wind the clock back, the money's gone, the banks are insolvent, and the brown stuff is being flicked off the fan with every rotation.

If either Japan or China has a real economic shock, then that will cause problems in other fragile economies with too much debt - the UK, Europe, and ultimately the US. All those free trade agreements won't looks so good when China's desperately devaluing to try and keep export levels up.

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Anonymous Coward

Re: There were many...

"We've seen this sooooo many times before that we know how this ends."

Yes, it ends in an almighty great war, orchestrated and provoked by the elites - as always.

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Re: There were many...

>What could possibly go wrong there?

Well they could all decide that they don't need any of that stuff, stop buying anything, keep the cash under the matress and suffer a couple of decades of deflation.

And that is if they are lucky and started off with a prosperous efficent technological economy - what would happen outside Japan would be much much worse.

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Re: There were many...

@AC

"Yes, it ends in an almighty great war, orchestrated and provoked by the elites - as always."

Whats this elites anyway? Is it the people we buy goods from or the people we willingly elect into government? The people we decry for not being as 'moral' as we want but still want their goodies, or the politicians we want but wont vote for because they are labelled nutters or racists?

The elites are in the mirror. But they dont like to think of themselves that way or feel they cant make a difference so why try. Or they band into a tribe and attack others because they are told to.

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Re: Whats this elites anyway?

Is it the people we buy goods from or the people we willingly elect into government?

How touchingly quaint.

The elites today are the people of influence, i.e. the people with money or with the capacity to influence the people with money. The people with money tell governments what they want, and your elected muppets do what they say.

Democracy ? It's a great idea. To work, The People need to do more than watch sports on the telly and complain about whoever it is they didn't elect.

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Anonymous Coward

Economics Smuckonomics

To (mis)quote the famous saying an economist "is an expert who will very seriously explain to you tomorrow why the things he predicted yesterday didn’t happen today. (and make you pay for telling you so)."

You will note that this definition is very close to that of a politician who "is a person who will explain you tomorrow why the things he promised yesterday didn’t happen today. (and why you need to pay more taxes)."

Economics masquerades as a "science" but when all is said and done is just a messy pile of theoretical models so remote from reality than their predictive power is close to 0. Somehow there is always an excuse for the prediction of economists to fail - it's not their fault if this this annoying reality stubbornly refuses to follow the elegant arbitrary equations of economics.

In a nutshell economists predict what will happen "if nothing unpredictable happens" (nice caveat isn't it).

The reason is that, at the end of the day, economics is "made" by people through their individual daily decisions, in other words economic trends are not the result of abstract equations painted on the wall of reality by the infamous invisible hand. Economic trends are rooted in human psychology and that is hellishly difficult to predict.

What will make people (and banks where decisions are after all made by humans - err at least I think so) feel positive and confident to invest? What will scare them away and generate a bank run? What new technology will radically change our lifestyles? Which products will become the next "must haves" and which ones will suddenly drop in oblivion? That's what drives economies.

If you could predict future events and model human reaction to them - with some level of confidence - then you would have a useful economic model. And also a magical tool to become a billionaire investor real fast.

So the day where you will see economists suddenly become fast track millionaires (and probably bust the market doing so :-) then you'll know economics has come of age.... until then it's just a very fancy snake oil extract.

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Re: Economics Smuckonomics

If you're going to invoke the invisible hand, at least understand the context in which it was used. It was relating to people's propensity to invest locally. Nothing more

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Anonymous Coward

Re: Economics Smuckonomics

With all due respect sir, I was not attempting to make an historically accurate reference to the way Adam Smith originally used the term. This was clearly not the context of the article, nor that of my comment, - had you taken the time to read either properly ;-)

I was merely hinting at the way the "invisible hand" expression has been abused by generations of economists - invoking it as a "deus ex machina" that could explain or solve everything without need for further evidence or accountability.

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Alien

Sitting Ducks

Sorry, can't resist a shot at each of them:

* A ceiling on rents reduces the quantity and quality of housing available. (93 per cent)

In isolation, yes. Falls down in a system where housing benefit dominates much of the market. Falls down even worse when building land is the limiting factor and taxpayer subsidies feed through to higher land prices.

* Tariffs and import quotas usually reduce general economic welfare. (93 per cent)

In isolation, yes. But may have perverse effects on movements of people.

* Flexible and floating exchange rates offer an effective international monetary arrangement. (90 per cent)

Yes, with various flaws including race-to-the-bottom and debasement. Haven't you put the case here for freer competition (c.f. Bitcoin)?

* Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90 per cent)

Dangerous. As exercised in the West, it's gone from sugar-rush to heroin-rush. The politician's dream: short-term gain, for long-term pain. Keynes must be spinning in his grave!

* The United States should not restrict employers from outsourcing work to foreign countries. (90 per cent)

You source work to people, not countries. Where those people are physically located matters in some jobs but not others.

* The United States should eliminate agricultural subsidies. (85 per cent)

As should other countries. And agriculture should be weaned off unsustainable practices such as heavy use of petrochemical fertilisers. In other words, post-1945 policy (whence came the subsidies) should have been an emergency measure to tide us over a period of unsustainable overpopulation.

* Local and state governments should eliminate subsidies to professional sports franchises. (85 per cent)

Bugger. Can't bring myself to quibble with that at all. Put a levy on overfed "sports" (like professional football) to fund sporting facilities for kids.

* If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85 per cent)

Horribly dangerous. That's what Brown was saying around 2004/5 when the big Ballsian stimulus was supposed to get us through a percieved downturn to the sunny uplands of never-never-land. Turns a regular recession into a generational crash and a zombie economy. And it's happening again now as another chancellor runs a huge deficit right through the illusory Good Times.

* The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85 per cent)

Interesting use of the future tense. Politicians like to compare to post-war reconstruction, but it's kind-of a 90/10 rule: you can rebuild the 90% very easily from a bombed-out 1945, but you won't get that kind of growth when you're already at 90% and up.

* Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84 per cent)

What recipients? Not those who spend it on fags-and-booze, nor their children. And that's precisely where the worst social problems lie.

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Anonymous Coward

Re: Sitting Ducks

"What recipients? Not those who spend it on fags-and-booze, nor their children. And that's precisely where the worst social problems lie."

I think you mean "which recipients". If you mean "what recipients", I can point to thousands in my constituency.

But you actually completely miss what Tim has actually said. Benefits should go directly to the recipents as cash. The bit you've missed is "recipient", meaning the actual person due the benefits instead of a proxy. If that recipent choses to destroy their own life by spending it on booze'n'fags instead of food'n'rent, that is their problem. The problem is if a proxy gets the money instead of the recipeint.

The problem with designing the system is to ensure the money actually does go to the benefit recipient, and not a feckless proxy. Children of feckless parents who spend their child benefit on booze'n'fags are poor because it's the untrusty proxy that gets the money, not the child. It is difficult to design a benefits system that has no negative externalities when people aggregate into families and we assign proxy responsibilities to people. How do you give a poor 5-year-old benefits? In our system it has to go to a parent. This is a reason that universal free school meals works better than giving poor parents money to pay for their child's school meals.

AC to comply with election rules 'cos I'm an election candidate.

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Re: Sitting Ducks

"an emergency measure to tide us over a period of unsustainable overpopulation."

So, a continuing emergency, then.

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Re: Sitting Ducks

Macroeconomics is mostly the pseudo-scientific justification for politicians doing stupid things.

It is a bit like suggesting that the real problem with the economy is that people don't have enough debt credit. No wait, its the same thing.

Reduce debt and people will be richer. I don't care about "feeling richer" I want, "actually richer."

I don't want the government over-spending on my behalf - that doesn't make "the government" poorer, that makes *me* poorer. If you don't think that, talk to the Greeks.

Thinking about ruined economies, my personal belief is that part of the problem is that we have allowed companies to become too large. The speed at which vast amounts of capital can move around the world brings chaos. Call centres moved into Ireland, hired labour from Eastern Europe, the lack of housing supply pushed up house prices, speculation and easy mortgages pushed them further. Then the call-centres close/shrink, the Eastern Europeans go home, housing demand drops through the floor and people are left with massive mortgages and no demand.

Its untrendy, but immigration controls could have helped avoid that. Mortgage controls and credit limits could have helped avoid that. Corporates would scream about being anti-business. Yes, that's right. I don't think its right for corporates to induce 25 years of debt pain in the general population in order to gain a few years higher profits. They can dump the warehouse call-centre shells and move everything to the Philippines to add 1.5 pennies per share profit for that quarter. In economics we call them "externalities" and in my view it is the governments' role to assess those and regulate the environment to keep it competitive and to limit the damage which can be caused by millions or billions of dollars, pounds and euros careening around the world.

I saw one estimate (on the BBC I think) that around 4-5% of the forex traded in London is needed to enable trade. The rest of it is all speculation. Yes we need exchange markets, but that level of volatility is a disaster waiting to happen. When that quantity of money can be shifted around based on rumour, gossip, news and a herd mentality, things are bound to go wrong which have a massive negative impact in the real world.

Are free markets a good thing? Not usually as far as I've seen, when you start getting very large corporations involved. Your ishiney might be slightly cheaper, but I'm not convinced the cost is worth it and I'm reasonably upset that governments have pretty much ceased conducting proper cost-benefit analyses. Competitive markets are generally good. These days however, nearly every industry appears to be a "natural monopoly" as companies try to get big in order to survive and who cares about the debt? It isn't my quarterly bonus which is affected.

In the long-term, things will even out, but there'll be a lot of pain in the mean-time. So much for a border-free Europe and the free market. The problem is that there is a difference between a free market and a competitive market. A competitive market keeps things broadly homogeneous. The real world is so far from "perfect competition" that its useless as a model for creating policy.

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Re: Sitting Ducks

Exactly - because many of the "obvious agreements" are just disguised versions of the completely discredited "rational actor, perfect information" economics.

Rent control - yes, and following on from the point, there is NO shortage of land in the UK at least. There is a shortage of planning permission. This causes that the entire housing industry, Including housing benefit, is slaved around literal rent-seeking behaviour as far as it possible to be from economic equilibrium. To put some figures, agricultural land two miles from where we live is £6k per acre, which fits 9 houses, or £700 per house (including overhead for roads). With planning permission in our village on the edge of Cambridge, more like £300K for the same land area.

Tariffs and import quotas are bad. I happen to agree on the outcome in specific UK circumstances, but the assumptions behind this as a general macroeconomic philosophy are ludicrous. Allegedly free trade is good, because you get to focus on what you are good at (comparative advantage). But Looking around you today, does comparative advantage really drive what countries export? When did Huawei, cough China, gain the CA in making telecom equipment against Ericsson and Nokia? They didn't, they just picked a winner, invested massively, and leveraged large numbers of very smart emigrants and then re-immigrants 10-15 years later, to capture the market. Good luck to them. But CA it ain't. UK "exports" financial services. Is that CA? Because every time the government thinks about the Tobin tax of 0.1% they all threaten to move country. Well if it is a CA, then 0.1% isn't a very big one.......

The real reason macroeconomics doesn't predict anything, is that it is spreadsheet economics

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Re: Sitting Ducks

"AC to comply with election rules 'cos I'm an election candidate."

A pox on you and all the other indistinguishable charlatans standing for election.

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Anonymous Coward

Re: Sitting Ducks

"But you actually completely miss what Tim has actually said. Benefits should go directly to the recipents as cash. The bit you've missed is "recipient", meaning the actual person due the benefits instead of a proxy. If that recipent choses to destroy their own life by spending it on booze'n'fags instead of food'n'rent, that is their problem. The problem is if a proxy gets the money instead of the recipeint."

But many times the recipient IS the parent (the poor parent getting SNAP/EBT benefits on their card). But this all assumes rational actors. Trouble is, what's the most common food bought with SNAP? Junk food. The FDA would love to change this to tightly restrict the eligible foods list (the way WIC is done with a specific list of foods you can buy with the vouchers), but that takes an Act of Congress, and Congress isn't interested.

In terms of the bigger picture, do the economists take irrational behavior into account with their agreements? What about knock-on effects like the thought that sending jobs abroad can have an effect on the home country full of people too old or too ingrained to re-train?

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Re: Sitting Ducks

There's nothing at all that says that comparative advantage has to be innate. We're all still better off if someone manufactures it.

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Anonymous Coward

Re: Sitting Ducks

"AC to comply with election rules 'cos I'm an election candidate."

"A pox on you and all the other indistinguishable charlatans standing for election."

Ok, who would you prefer to run the country, and how would they be chosen? And, importantly, how would Joe Everyman get to be one of the people doing the choosing without having to ensure they came out of the right vagina?

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Re: Sitting Ducks

Random drawing from the population. With some groups excluded, much like jury duty.

It would at least mean that the corruption would have to take new forms :)

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Re: Sitting Ducks

* Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84 per cent)

What recipients? Not those who spend it on fags-and-booze, nor their children. And that's precisely where the worst social problems lie.

It starts with people whining about sin spending, and then you have presidential candidates talking about "strapping young bucks [minority men]" using welfare to buy T-Bone steaks (Reagan, 1976). If there ever was a slippery slope that existed in the real world, it's the insidious myth of welfare cheats/queens. These people rarely exist.

Yet because of this pernicious talking point, we have states passing restrictions on how cash-like benefits can be used, like no seafood (sounds good when it's lobster, not so good when it also prevents buying a tin of tuna), no spices or herbs (favor is only for those who earn it), or nuts (because good health is also something you have to earn). And even if we applied rules that restricted it to healthy items, that definition 15 years ago would have excluded butter, eggs, dairy with fat, and many vegetable oils while providing "healthful" alternatives like partially hydrogenated oils (margarine), fruit juices, and "fortified" cereals like Frosted Mini Wheats. Never mind that today, those "healthy" items all have a growing list of ills associated to them while the demonized items of the 90s are turning out to be a lot healthier than originally thought.

As someone who seems to be concerned with the removal of the free market from things, by advocating the picking of winners and losers in the food world by the government, or more specifically, the morality police, you screw the rest of us who aren't getting benefits. There are enough welfare dollars there to sway manufacturers and producers in a direction that may be proven wrong in another 15 years. Worst of all, the benefit of being able to pivot with the market is removed because laws take forever to change and the morality police are not exactly known for being receptive to ideas that challenge or refute their world-views.

As Mr. Worstall talked about a few weeks back, scrap welfare and this hand-wringing over the morality of certain items and just give a minimum basic income to everyone. That way, I can tell you and all those morality cops to stop policing the lives of others because you think they are deficient or incapable of living without someone over their shoulder telling them how they are failing. The fact that you have a job does not give you some kind of superiority or moral high ground; it just means you have a job (which many people on welfare have, it just doesn't provide enough)

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Re: Election Candidate

'This is a reason that universal free school meals works better than giving poor parents money to pay for their child's school meals'

Do the rules prevent you from declaring your interest in Compass (other private meal [sic] providers available).

There are very good reasons why 'Company Scrip' was outlawed.

The reasoning seems to that poor people are poor because they are feckless, lazy and stupid and as such can't be allowed to make their own decisions or given the opportunity to learn from their own mistakes, the outcome from that line of thinking is to transfer the benefits (both cash and economic) from the poor person to the large corporate.

As the large corporates take the lions share of any public benefits just who are the scroungers here ?

Benefit levels are set at subsistance levels not because that is all the country can afford but so that large corporates can extract as much profit per employee as possible, demonising the poor helps the cause which is idealogical and not based on any reality. (low benefit levels stops everybody getting rich)

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Re: Planning Permission

A benefit given by the public for the benefit of the minority.

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Anonymous Coward

Re: Sitting Ducks

Remember, remember...

The last honest man to enter the Houses Of Parliament was in 1605...

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Anonymous Coward

Re: Sitting Ducks

So, your answer to the person who says "I don't like what's going on, I want to try and change things!" is: Fuck off. Your system is essentially what we had before the 19th century where those in power were picked randomly from the population based on the random selection of what vagina they'd slid down.

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Anonymous Coward

Re: Election Candidate

I don't have any interest in Compass (and I had to look it up to check what it was - I thought you were referring to Political Compass).

Some people are poor because they are feckless, but that is a small minority. Most poor people are poor because the world has conspired, in one way or another, to make them poor. Mostly it is the same as how rich people are rich - luck. Whose vagina you came out of, what school you went to, what in-crowd that school gave you, what strings your parents were able to pull for you, what collections of aptitudes you were born with that you can convert into skills somebody is willing to pay for.

The more that poor people are automatically assumed to be stupid and feckless and have their decision-making powers taken away from them, the more they are unable to actually learn from their decision-making processes and escape from the lottery that life has given them.

Personally, I don't care if feckless poor people destroy their own lives through their own fecklessness, as long as they don't take anybody else with them.

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Re: A fair rebuttal

Where do you stand on LVT, planning permission as a common resource and the lrgitimisation, regulation and taxation of recreational drugs ? (we'll get to IP later)

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Anonymous Coward

Re: A fair rebuttal

I've been leafleting almost all day and my brain feels like what my knees feel like. Let me do some background research and I'll post something when I can think straight.

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Re: Election Candidate

@AC uninterested in Compass - So, you are saying social mobility is dead and higher educational institutions are closed shops to certain social classes?

My internal economist picks a shortage of tin foil ahead.

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Anonymous Coward

Re: A fair rebuttal

"(we'll get to IP later)" - should our (potential) MPs really need an opinion on a low-level networking protocol that's served us so well?

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Re: Sitting Ducks

To be perfectly honest, if I were up shit creek and having to rely on Government handouts I'd want a bloody drink. I don't begrudge them that and I'd hope the ones that piss all their benefits up the wall are, as I suspect, an absolute minority.

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Anonymous Coward

Re: Sitting Ducks

>> A ceiling on rents reduces the quantity and quality of housing available. (93 per cent)

> In isolation, yes. Falls down in a system where housing benefit dominates much of the market. Falls down even worse when building land is the limiting factor and taxpayer subsidies feed through to higher land prices.

Yes, I agree that artificially restricting supply (planning control) will raise prices, as will having a system that pays "market price" for the product. But that doesn't negate the first statement - it's quite convincingly shown that everywhere that has rent control, also has worse (and less of it) housing than places that don't.

Whatever you think of the "corporate landlord", studies have shown that many housing development can only be built because some buyers will buy "off plan" - ie pay up front based only on some drawings of what the property will look like when it's been built. Few private buyers have the cash for that - so it comes down to businesses who have enough cash for a deposit, a business plan that a lender will believe, and enough cash to pay mortgage repayments between buying and the property being ready to rent out.

Businesses and their lenders will not lend on a deal which doesn't allow for a reasonable profit - if yuo can't make a profit on the deal, then the money goes where it can make a profit. That's economics basics !

So if the money doesn't go into buying off plan for new developments - many of them won't get built.

And for those properties that are already built - if you cap income (ie rent), then you'll also restrict investment in maintaining that property.

In the interests of disclosure, I'm a landlord. Supposedly, if you listen to the politicians and their soundbites, I'm some evil "Mr Big" screwing my tenants and living it up on obscene profits. Guess what, I make naff-all profit on my 2 properties by the time bills are paid, and my tenants are very happy.

One in particular is a friend of a friend, and a divorcee. She's happy to have someone else worry about maintenance etc - she just pays the rents and lets me take care of stuff. She used to have her own home, so fully understands the costs and hassles that so many ignore.

Electrical problems - SEP. Boiler breakdown - SEP. Leaky roof - SEP. Long list of other expenses - SEP.

SEP = Someone Else's Problem

And all that for less that I pay in mortgage repayments each month.

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Re: Sitting Ducks @Eric Olsen

You really want humanity to reach the lowest possible common denominator don't you?

If you give money to the seriously drug addled, they will keep spending it on drugs until they either die or grow up. Most choose to die high.

The same with welfare queens that have been on welfare for 40 years and have raised 4 generations of children to think if I can just get pregnant I can get my own welfare check and my own apartment. Keep making the problem worse by supporting the source.

Just so much to aspire to in your world. Why even go to school and learn when you can get welfare? What possible reason could you have for becoming "better"? That word doesn't exist in your world.

If people have no compass (moral or otherwise), they lose their way and most fail.

The idea of "superiority" is only a problem when you have already defeated yourself by not trying.

If you don't even try to strive towards a better life, you're already lost and should just kill yourself.

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Re: Sitting Ducks @Dan Paul

You'll find that your "welfare queen" is a political straw(wo)man that is used to rile folks like you up. Congratulations, you've fallen for the ruse, hook, line, and sinker.

And as a sworn officer of the morality cops, I'm sure this next piece of information won't sway you a bit, as it contradicts your carefully constructed view of the world.

Families that receive cash benefits instead of vouchers or other restricted-use benefits have better outcomes for their children (http://www.nber.org/papers/w21101)

From the paper's abstract:

Our findings suggest that additional income may improve outcomes through both mechanisms: some benefit income is spent on direct education and health inputs, while some is spent on everyday items likely to improve the general conditions children face. Additionally, some families reduce spending on risky behavior items

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Re: Sitting Ducks @Dan Paul

@ Eric Olson

"You'll find that your "welfare queen" is a political straw(wo)man that is used to rile folks like you up. Congratulations, you've fallen for the ruse, hook, line, and sinker."

FYI I went to school with a few of them. I say a few because just in my year there were 3 pregnancies during school and at least 2 from leaving school (all different girls) who had done it for the free house and free cash (as well as a cute little baby). They had no shame about it, they were proud. One even went so far as to rub it in the nose of the very people she had been working with for the few months after she left school.

People who say such things are a lie and a straw man have had a lucky time of not meeting them (or knowingly).

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Re: Sitting Ducks @Dan Paul

Did they personally tell you this, or was that rumor? Did you actually verify they received such a benefit? Last I checked in the US, there is no such thing as free housing. You can sign up for a waiting list, assuming you can actually find one that's open, to get Section 8 housing, but that still requires that you pay a portion of the rent. And many people have been on Section 8 housing assistance waiting lists for over a year. And the "free cash" has always been a small amount, such that a single parent with one child with a low income receives around $400 a month. And there are work or retraining requirements to continue the benefits. And if they are minors themselves, they generally have to continue living with their parents, or a legal guardian, and still remain in school to get the benefit, and the benefit goes to their parents or caretaker.

In short, your anecdote doesn't pass the smell test from a US standpoint. You have an incorrect memory of the events, were mislead about what exactly happened to them, or are misrepresenting what actually happened. I applaud your attempt to lend plausibility to the story by making it seem like you were actually there, but it's not any less asinine than Reagan's oft-repeated claims about those strapping young bucks. That, or you are referring to a time many years ago when it was hard to verify identify and fraud could happen with only a few aliases. But that's called criminal behavior and is prosecuted as such, and happens as much as other sensational crimes that cause plenty of tittering at media outlets of ill-repute. There are plenty more cases of elder abuse and identity theft to defraud Medicare and Medicaid, perpetrated by white collar crooks looks to make a quick buck, or the hucksters selling snake oil because the law of the land allows anyone to sell a pill as a "supplement" and sell it through Dr. Oz and his ilk. The volume and cost to the country dwarf any of the costs we could recover by going after mythical welfare queens.

But hey, don't let that dissuade you from your crusade.

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Re: Sitting Ducks @Dan Paul

@ Eric Olson

"Did they personally tell you this, or was that rumor? Did you actually verify they received such a benefit?"

In person, no shame, more than happy about it (hence their bragging). By verify do you mean did I break into their home or demand to see their balance sheets (amuse me and say yes, please)? No rumour involved all first hand. I am aware of others but that would be by rumour not first hand (from the same school, tight knit groups who talked about it openly).

"Last I checked in the US, there is no such thing as free housing."

That may be where we are parting on this, I am in the UK not US. And here the welfare state is loved even if the people who pay for it are vilified.

As for their situations now, I cannot tell as I moved out of the area a few years ago. I know (first hand) that 2 of the girls had a second child while considering a third. One seemed less impressed with her dream life but had yet to do anything about it.

I also knew a couple more who didnt get pregnant but lived at home while refusing to work. They enjoyed coming into the workplace (they used to work the same store as me) and muse over how much more they get 'now they dont work'. However they only seemed to last a few years before getting jobs but I dont know the reason.

Maybe you dont have the same problem in the US. I dunno.

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Re: Sitting Ducks @Eric Olsen

My ex girlfriend was a property manager for subsidized housing for well over 10 years and yes, the "Welfare Queen" is alive and well in the Buffalo, NY area and everywhere else in cities in the USA.

It's not a strawman argument.

She personally handled the paperwork for dozens of them in her apartment buildings and knew the status of their children. Children who left the roost, got pregnant, got welfare and immediately tried to get section 8 housing subsidies at the same apartment complex where their mother lived.

Every family consisted of a single parent and multiple children and were completley dependent on welfare for everything.

This apartment building would ONLY take Section 8 clients as the payments go directly

to the apartment owner.

Any payments made to the "Welfare Queens" never made it to the building owner and the "client" was soon evicted (actually took over a year to accomplish eviction and costs thousands to do it).

You can quote all the so called studies you want. Reality beats academia every day.

No ruse, just simple fact, no weasel words just real life examples... and none of it came from a questionable source like NBER who has a leftwing socialist agenda.

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Re: Sitting Ducks @Eric Olsen

Saw this happen in real life with my own two eyes and ears. And no, if you are section 8, the whole rent and even some utility costs can be paid directly to the property owner.

Everything else you mention doesn't happen in NY State where you can get LIFETIME welfare benefits. The age of majority to emancipate yourself from parental regulation is 16. Getting pregnant seals the deal and qualifies you for every benefit including housing. Yes, there is some wait for housing but the cash rolls in regardless.

You are so full of your so called "Education" that you only believe what you read in studies, not what happens in real life.

Take your over-educated head out of your butt and see what is really happening. Who said anything about "going after welfare queens"? I just said it was happening all over and that people should not get benefits without something in return like work.

But hey, don't that get in the way of your leftwing propaganda and lies.

Over 50% of the people in this country recieve some kind of social support payment. Fraud is rarely investigated because that could be considered "racist".

The rest of us work for a living and I for one am sick and tired of supporting the lazy ones with my taxes when I don't get a say in how they are spent.

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Black Helicopters

A different perspective

All of this seems to assume that theories are developed from studying the fluid "money" and how it behaves under pressure, when its flow constrained etc., etc. Implicit in this approach is the assumption that the "markets" have "natural properties" than can be deduced in a similar way to the natural laws that govern the world around it.

Alternatively, money might be more like a flow of electrons that can be enriched or impoverished and made to flow and behave in complex ways using hardware and software to achieve specific results.

Which may or may not include "crashes".

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Like seismology...

...you know where the catastrophe is going to hit, but no one can predict when. I remember predictions of disaster years in advanced but the crisis was well under way before it became general knowledge. At least a year before Lehmans went down I was reading the blog of a (now sadly deceased) SAP consultant describing what was going wrong and the likely implications.

It doesn't help that the political class is shit scared of being honest and precipitating things. Do remember the shit Alistair Darling got when he said how bad it was going to get?

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A good question

And one which deserved a good answer. The growth of credit before the crash seemed unsustainable to me so why did nobody in government - such as a chancellor who seemed to consider himself in economics whizz - think the same? And decide that applying the breaks might have been a good idea?

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Re: A good question

Probably because of psychology. No one likes a party pooped, and politicians face the risk of raining on their constituents' parade. How do you think they'll react? There's a reason representative government ducks when it comes to necessary evils outside of a crisis.

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Re: A good question

Agreed. But, assuming that the question was asked of Blair or Brown, it deserved a straight answer. Politicians are in the habit of lying to their electorates because they can get away with it. But the head of state should be answered honestly if only because heads of government need something to make them face facts. Giving such an answer might have required some uncomfortable introspection.

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Anonymous Coward

Re: A good question

Please don't forget that the Tories were complaining that Labour weren't doing enough to expand the economy, just like they attacked Brown for not doing enough to help the City when it hit the fan.

Both parties were (and are) in thrall to the City and that will remain their overriding priority; as Paxman pointed out, we voters get to choose between two men who both went to school with Boris Johnson.

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Re: A good question

What could they have done ?

The only power they have would have been to take over the bank of England (preferably involving the SAS bursting through windows) and raise interest rates to what people were paying on their credit cards. Cause a massive housing crash, 100,000s of evictions and raise the value of sterling to the point that totally destroyed any remaining industry.

Or Blair could have gone on TV and said, "the economy is going to crash in 45minutes/weeks/months, trust me" and everyone would stop bing big screen tvs

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Anonymous Coward

The HOW now seems more important than the WHY

The root cause of the crash was because the banks were cutting their opiates (low default probability mortgages) with some junk (high default probability mortgages) which was sold on the open market and pushing up housing prices internationally.

Once the financial con was discovered an entire part of society found that their homes repayments got unaffordable, banks didn't trust what was being traded and unwilling to take on the risk they caused.

Predicting criminal behaviour can be done & was in the law, but stopping such behaviour means policing, something banks are quite notably against.

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Re: The HOW now seems more important than the WHY

"The root cause of the crash was because the banks were cutting their opiates (low default probability mortgages) with some junk (high default probability mortgages) which was sold on the open market "

Well, there are more moving parts than that.

The ratings agencies, who should have been correctly identifying the actual risk used incorrect or criminally incompetent or corrupted methods the value them.

The buyers shouldn't have so trusted the clearly BS figures given. Some people are not really culturally open to the idea that other bankers/governments might actually be outright liars (see Greek government figures and trusting Germans).

Then you've got straight up political interference in the market, in the form of Fannie and Freddie in the US. So everyone should get a home loan, even if you cannot pay that home loan, which is as doomed to failure as setting the price of toilet paper. You can't just legislate something that is fundamentally a market good.

Then the incentives system whereby selling something, even if it later turns out to be pure crap, earns you more than honest work. Be that the people making NINJA loans (or guiding their clients to fraud), the ratings agencies paid by the rating they give, the people selling clearly bunk derivatives, and the politicians who are happy to be paid to remove regulatory barriers that prevent some of these abuses.

It's a cycle of problems, not just one part. Blaming the banks alone is fun, but to truly fuck something up you need to have government, business and the plebs all working together :)

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Re: The HOW now seems more important than the WHY

I think you need to look further for the root cause. The only reason the junk was saleable was because the interest rates were low and the interest rates were kept low because politicians like Brown deliberately ignored house price inflation by leaving housing costs out of the indices used to determine interest rates*. At one level this was probably to promote a boom and help re-election. I suspect there was a further motive. Low interest rates encouraged more private borrowing and part of that borrowed money came into the exchequer in the form of VAT & stamp duty. So in addition to Brown's stealth taxes he also had stealth borrowing; borrowed money that wasn't on the government's books.

*At the same time a lot of formerly domestic production was being offshored which further reduced inflation and hence interest rates. This, of course, didn't help employment.

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Re: The HOW now seems more important than the WHY

So Brown caused the US sub-prime crisis? Nice to know a post-war British PM had some legacy

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