Debating with people in real life about the 2008 crisis

Economics Economics Questions
1

I have stuck around here for awhile, and I have seriously not found a good answer for this.

Its seriously almost impossible. Everytime I get into a debate with relatives or family members, it always ends up just them arrogantly defending their claims. You can’t debate the financial crisis at all with anyone, everyone seems to think the mortgage industry lent out huge loans, and expected a lot to be paid back. How the heck do you deny this? Everyone will claim that they did that because of the lack of regulation in the housing market.

Also my Grandpa talks to me about Economics a lot, he has run his own business he quoted someone the other day, and said “Free Enterprise works the best, however adult supervision is necessary”. I don’t know what to say to this at all, but its a really generic term that most people seem to agree with. I mean even Stock Brokers and NYSE supervisors have said there needs to be regulation. I mean, I know that we don’t have a free market, but how can you deny that the mortgage and lending firms “went ape bomb?”.

Then we were talking about Universal Health Care, he thinks UHC would be a good thing since the U.S ranks 37th in Adult Health Care and 38th in Child Health Care, while France ranks the best in the world, and Canada has a great system. This seems to be a general belief, I have referenced to Stossel’s 20/20 episode of ‘Sick In America’ but he thinks that Stossel is biased since he is a Fox News reporter.

My aunt had an experience where they got a new house and mortgage brokers called them up, and offered them HUGE, and seemingly ideal deals for houses, they didn’t buy into it since they knew it was shady. However, they still blame them for taking advantage of consumers.

Additionally, everyone thinks an unregulated Credit Card industry has caused chaos. Credit Card companies are issuing cards to consumers with bad credit so that they can get more money from them in interest rates. They also just raise your interest rate without warning, and aggressively market to minors since they are more vulnerable. Universal Default, is a term where credit card companies can deny you a card, or raise your interest rates based on your standing with another company you have a card with.

2

The general argument against freedom in economics, or in general, is that, freedom doesn’t protect the small from the big. Of course, since that’s their argument, you can use an argument in the same manner, and that is can Government do just that? Depending on that answer. It’s usually, yes. Government can work in the best interest of the people. By then, you can’t really argue with these people. I just throw out a witty comment like, I have hundreds of years of history that prove you wrong. And then let them go on a rant. Logically if you look at it, the argument that Government can protect the weak from the powerful, is a scam. Government has no power. It has to take power. When it takes the power, they are the “powerful”. Now, what’s stopping government from hurting if you will, the weak. Besides, most people don’t even know what freedom really means. So there’s no point in debating these people. It’s all childs arguments.

As for the UHC, I really don’t see how more Government will help it. We have more then 50% of government in health care. I mean, we are already socialist in that area. We only pay 1-3 dollars average I believe at check-ups, lower then Canada and the rest of that bunch. I read somewhere, that the Health Insurance Lobbyist spent millions to push the bill through. That alone just spells disaster.

3

Well than everybody (whoever that is) seems to be right. They in fact lend out huge loans because they expected to get a lot paid back It is called economy. The issue is not banks lending to make as much profits as possible, the issue is who made it possible for them to do so without taking a real risk.

Now here our friend everybody is flat out wrong. In fact the regulations and the knowledge that the regulator -that is the state- will eventually bail out those banks led them to grant loans that would never have been granted in an unregulated marktet, as in such a market, the lender would lend on his own- not the taxpayers- risk.

If you knew someone else would carry the risk for you, you would lend to anyone not caring if he could pay back at all. The way to cope with this issue is not to regulate more but to stop carrying risks for lenders all together.

Isn’t it funny that the most regulated industry worldwide, that is the financial industry, was the first to crash?

Qui bono? What benefits would Brokers have from more rehulation? Answer, less risk. And Suprvisors? More power.

Nobody deniesthat the firms “went ape”, but, see above, for good reasons.

Theres is universal health care, it is called paradies. Unfortunately we are on the wrong side of it. I believe it is a good thing to make some preparations for the case of a bad illness. But, I believe as well, that those preparations have to be done by each individual on his own. Health is just another prerequisite to achive ones goals, so is breathing, eating, aquirign skills and on and on. The question is not whos fault it is that you got ill, the question is does that give you a right to rob others so you can survive? I doubt it.

If you are looking for a new tv set and you find one in your local store for 500 bucks while you remember that Wal-Mart sells the same item for 459, do you take advantage of the local store because you decide to buy the Wal-Mart set?

See what I said already about lenders further above. A Credit Card is a credit, that is why they call it Credit Card. You made a contract with the card company and if they violate the contract you can hold them liable. All the rest is useless fluff. There is no natural right to a credit card. Of course can anybody deny to do business with anybody as he pleases. You can deny your local tv store doing business with it and go to Wal Mart or whomever.

In every case you buy something you actually sell soemthing too. You sell money. If you buy a tv set at Wal Mart, you actually sell money to them and they pay you in terms of a … tv set. So each buyer is a seller. He sells money. So would you want to be told it is unfair to sell your money to Wal Mart because your local store misses the oportunity to do so? Cool, let’s make a law to force money sellers (that is consumers) to only sell money at local stores.

You can see how rediculous those arguments get if you just turn them around.

Hope that helsp a bit in your further debatea. But, keep in mind, don’t upset others too much, learning is a process that everybody has to engage in by himself.

4

Do you ever win any arguments? This post is basically the same as your other threads…

I was talking to one of my professors about everything, and I more than held my ground even after foolishly declaring the anarchist position early on. You have to know the theoretical arguments, because they won’t be able to answer them. You have to know your history, because they’ll throw a bunch of wrong history at you. You have to know which arguments to use when, because not everything they say is wrong or worth correcting. You have to know how to stay on the right topics and how to frame arguments, because if you get off topic you’ll never convince them.

Staying calm helps too. Don’t interrupt them. If they keep talking just pick out the Achilles’s heel in their argument and start with that.

5

There are three types of people you will deal with in debates like this: the honestly ignorant; the willfully ignorant; the derranged. Anyone who thinks the housing market and financial markets in general lack regulation fall into one of those three categories. The honestly ignorant simply don’t know better, but have been taught something and will be loath to let that ‘knowledge’ go as most people prefer security to truth. The willfully ignorant have an agenda and know damn well what they are saying is wrong, they just don’t care because they think lying serves a higher good. The derranged are simply a waste of time. There’s a subset of the honestly ignorant who understand that there is a high level of regulation on the market but still see it as irrelevant and/or negligible. To these people every problem boils down to obedience, every solution boils down to another set of orders as to how to behave, so any level of regulation simply is never ‘enough’.

There can be no debate if there is no agreement on the basic state of reality. Anyone who thinks the housing market is unregulated is either an idiot, lying, or they are insane. In any of those cases, what would you hope to gain through debate? You will gain nothing. Which is your complaint, but really you should have seen it coming. So avoid the topic when you’re dealing with those three types and see if you can enjoy some of the more pleasant aspects of their personalities.

6

My mother asked me to explain to her the reason why this crisis happened, why it’s so severe, why it doesn’t want to go away despite big claims to the contrary and what can be done about it. Sure, I quoted banks as being part of the problem, how the “packaged mortgages” almost took down some of Europe’s largest banks, I quoted the American nation getting so deep into debt. But before getting started I gave a few highlights of Keynes’ ideas and how they contrast with Mises’ and the other Austrians. She plainly told me that the Austrians’ theories are the most common sense she ever heard in her entire life (and bear in mind that before getting married back in the '60s she made a little money by selling Che Guevara and Castro posters she made herself, just to show which part of the political spectrum she belongs to). I also told her how, in my opinion, politicians and economists know perfectly well the system in unsustainable in the medium run and free-market reforms are sorely needed but cannot do anything about it because people are now addicted to the free lunch mentality. It was a civil debate (we quarreled a lot over politics in the past and fiven our respective age that means… a lot) and gave me some insights.

Most people do not go over the bank and mortgages part: they download the latest Michael Moore from the Internet (breaking a few copyright and IP laws in the process but, hey “DVDs are overpriced, dude!”) and after seeing it they are more confused and angry than before so they stick to the same old fallacies. Nobody explained to them that large corrupt and inefficient corporations are an abomination to the free market and can only survive with full government backing: that’s why they still equate “corporativism” and “fascism” with “free market” and “capitalism”. Nobody explained to them that pumping more “liquidity” into “the market” is equal to giving an heroine addict more of his favorite poison to get him over the present crisis: they think that interest rates should be as low as possible and do not realize they are becoming addicts themselves. And nobody bothered explaining to them that legislation is not there to “protect the children” but mainly to protect not so vested interests and as rationing measures (I said “mainly” because politicians’ petty fantasies are an important part of the equation).

Most persons are not bad, they are just blissfully ignorant useful idiots.

7

I’ve done that before. And then anything I say afterwards some people never hear a word of. They are still struck by the fact that I said I like anarchy. Everything after is a blur to them and they become very defensive.

I now begin with, “I’m for liberty”. I define it, discuss the NAP, and go from there and see what they talk about. I haven’t met anybody that’s not for liberty. Everybody loves liberty that I’ve met.

To the OP: At the moment the first thing I bring up is the unemployment rate and then discuss how the government policy has changed since ca. 1980 in what umemployment rate is announced. Ca. pre-1980 the rate included those no longer looking for a job. That number at the moment is ca. 17.6%. I then discuss how the great depression had numbers close to this current rate. I then ask them, “Now why did the government change this policy in what unemployment rate they announce?” Depends on how the discussion may go in how the conversation naturally evolves.

8

Why does it seem like a crisis isn’t a “crisis” until the State declares it so?

The so-called 2008 Crisis has been there for decades under the disguise of “good times”.

I think the real debate should be which is worse? The Mortgage/Banking Crisis of 2008 or the Government Intervention of the Mortgage/Banking Crisis of 2008-2009?

I also think it’s pointless to try to debate people who aren’t really willing to debate. They’ve thrown out reason for conventional thinking and slogans. If they aren’t willing to read legitimate books on the subject or research the facts, then they aren’t very serious in finding the truth. That’s probably the only thing I think you could confront them with, but that’s at risk of destroying a relationship.

9

The key with other theories of business cycle is that they dont explain the sudden cluster of entrepreneurial errors, where there was none before.

10

I was surprised I was able to still carry on a cogent discussion with my professor. It just shows, and I say this for the benefit of DFB, that how radical your arguments are doesn’t matter if you can present them properly. Its all about skill in argumentation.

11

Can anyone explain what happened with the Airline Industry? It seems as soon as we deregulated that it crashed for a short time, traveling was way too expensive, and it immediately went into the negatives on the stock market.

12

Firstly, there is no such thing as an economic crisis.

13

Air travel is the only transportation that is taxed. You can buy a train ticket and you simply pay the ticket price. Buy a plane ticket and you are looking at a full sales tax applied on top.

14

Me thinks it may have a lot to do with the fluctuating price of oil and unionized labour. Also, aren’t airfares filled to the brim with surchages and airport “taxes” as well?

15

If you look up Wikipedia on the “airline industry”, you’ll see it’s a huge mess, and has always been so. Oddly enough, the two factors Austrian Economics says guarentee an industries failure are right there staring us in the face:

  1. Gov’t pokes it’s nose into the industry with it’s cumbersome regulations:

"Many countries have national airlines that the government owns and operates. Fully private airlines are subject to a great deal of government regulation for economic, political, and safety concerns. For instance, the government often intervenes to halt airline labor actions in order to protect the free flow of people, communications, and goods between different regions without compromising safety.

The United States, Australia, and to a lesser extent Brazil, Mexico, the United Kingdom and Japan have “deregulated” their airlines. In the past, these governments dictated airfares, route networks, and other operational requirements for each airline." Nuff said.

  1. The regulations somehow, by incredible “coincidence”, wind up stifling competition;

“The entry barriers for new airlines are lower in a deregulated market, and so the U.S. has seen hundreds of airlines start up (sometimes for only a brief operating period). This has produced far greater competition than before deregulation in most markets, and average fares tend to drop 20% or more. The added competition, together with pricing freedom, means that new entrants often take market share with highly reduced rates that, to a limited degree, full service airlines must match.”

And can we forget our friend the bailout?

  1. "Historically, air travel has survived largely through state support, whether in the form of equity or subsidies. The airline industry as a whole has made a cumulative loss during its 120-year history, once the costs include subsidies for aircraft development and airport construction.[16][17]

One argument is that positive externalities, such as higher growth due to global mobility, outweigh the microeconomic losses and justify continuing government intervention. A historically high level of government intervention in the airline industry can be seen as part of a wider political consensus on strategic forms of transport, such as highways and railways, both of which receive public funding in most parts of the world. Profitability is likely to improve in the future as privatization continues and more competitive low-cost carriers proliferate."

See also a section in the article devoted exclusively to a massive bailout after 9/11.

As for traveling being way too expensive after deregulation, here’s Uncle Wiki’s take:

“The entry barriers for new airlines are lower in a deregulated market, and so the U.S. has seen hundreds of airlines start up (sometimes for only a brief operating period). This has produced far greater competition than before deregulation in most markets, and average fares tend to drop 20% or more.”

OK bottom line, if a truly free market existed in the airline industry, what would happen? Could it be run profitably? I don’t know. Not every thing can make money. Maybe it’s a noble experiment that failed.

16

does anyone know of some good useful analogies to help explain things to people?

Or of some short, well-written articles /internet video clips explaining what happened to get things started

also any articles showing predictions from before the crisis would be helpful as well.

17

Actually, “deregulation” is usually problematic and tends to lead to bad outcomes. The reason is obvious - to get it done, it has to be done by politicians. That means it has to be done in a way that pleases the group being “regulated.” Hence, what they tend to do is deregulate one side of the transaction, but not the other. Banking deregulation was bad - you can’t privatize gain, socialize risk, and then make no attempt to control the risks taken by the bank, that’s a recipe for disaster.

18

That’s off the top of my head.

19

A good analogy: “Blaming the meltdown on greed is like blaming a plane crash on gravity”.

I’ve had a fair bit of success talking to people about the meltdown, but I don’t really try to get into big debates about it. Just mentioning what the fed does, and what the implicit bailout guaranteed to banks, and the existence of laws encouraging poor lending practises (NINJA loans, ‘affirmative action’ in lending etc) gets people thinking a bit. Unfortunately, most people don’t think more than a little bit. Basically, I don’t have many people really try to argue me down, but I do struggle to maintain interest. I’ve only had one (otherwise very intelligent) friend that argued the conventional economic opinion, but he was very interested in what I had to say about it (austrian trade cycle, the actions of the fed etc), and maybe he’ll come around a bit closer to my side of the debate once he’s had time to think about it.

One thing I’ve found, is that people take a while to get used to new ideas. If they don’t have the time to get used to new ideas, and they’re pushed too hard, they’ll grip even more tightly to their erroneous ideas.