now you appear to have made several comments on fiat currency. But if you look carefully all currency is fiat currency: none of it has any intrinsic value in and of itself. It has value only because people agree that it has value.

A good discussion of this perhaps can be found in “The Ascent of MOney” by Ferguson.

You also might look at “The Return of Depression Economics” by Krugman. The discussion of the baby sitting coop it perhaps most instructive here.

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and it would appear you still have not addressed the relative importance of the credit default swap market vs. the mortgage market.

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now when jyoiu say:

“Liberal free-market economy I think has completely gone by the wayside. We’re on a fiat currency. We have the government presently “owning” large chunks of private industry, banks in debt up to their eyeballs, a floundering federal reserve and a volitile stock market which more and more is requiring government intervention.”

then I suggest the majority of your complaints occurred under the Bush administration. I suggest a discussion with Republicans on their behavior here is perhaps what you are asking for. I certainly will not defend the Bush administration’s economic and regulatory policies.

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it would seem when you say:

“I suppose as a layman, when I see the government spend its surplus or run a deficit in a recession that it generally amounts to regulation. ”

You are confounding two different concepts which even show up in the period of validty for each of the actions of the legislation.

and without precision here, I suggest the discussion rapidly degenerates.

If you would likle to discuss Keynesian economics, lets talk Keynesian economics.

If you would like to discuss regulation lets discuss regulation.

But to call regulation Keynesian economics merely obscures the discussion without providing any clarity.

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No dollars from D.C. come without regulatory strings. It’s like they purchase the right to regulate or regulate the right to purchase, either way, I see there being more of a convergence of regulation and spending than there being two distinct spheres.

I tend to be bipartisan politically. I don’t try and blame a party line, for there has been enough folly in both camps to testify of the imperfect attempts at economic regulation and stimulus.

Keynesian economics. Doesn’t it encourage government participation and involvement in maintaining the economy? Sure. And where you have this involvement, you will have “regulation” and money spent to ensure the regulations are inforced or money spent to stimulate the economy. Either way, its regulation.

Liberal free-market economy I think has completely gone by the wayside. We’re on a fiat currency. We have the government presently “owning” large chunks of private industry, banks in debt up to their eyeballs, a floundering federal reserve and a volitile stock market which more and more is requiring government intervention. Keynesian economics stifles liberal free-markets by encouraging large-scale government intervention, which inevitably devalues a fiat currency. My original question is how does one reconcile the two for they are pretty much contrary to one another in their doctrines regarding government intervention.

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now it is perhaps worth commenting that it was a conservative poster in this blog, Peter Leavitt, who first raised the Commodities Futures Modernization Act of 2000 as a major component of this economic crisis.

Peter argued that this was a Democratic enacted legslation. A look at the detailed history of this bill will, I suggest, make it clear that it was pushed through during a closing omnibus budget act driven by a bipartisan crew but led by Republican leadership in a Republican controlled congress. The act was attached to must pass legislation required to continue funding the Federal government.

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when you say:

” Why does it appear that liberals follow Keynesian economics in a recession but refuse to “regulate” in times of economic upturn, when perhaps it would be an opportune time to be proactive in addressing potentially harmful trends?”

I suggest we need to separate two questions here:

- deficit spending
- regulation

Keynesian econoomics as I understand it has as one of its principles that during good times one runs a surplus and in recessionary times one runs a deficit.

Bush clearly did not use this model. As I noted, Clinton did.

However, running surpluses in good times is arguably not nearly as much fun for any politician as spending on new programs: it is easier to explain the impact of say a new bridge than it is to say we have reduced the deficit.

Regulation is a different issue altogether and is not, as I understand it, directly addressed by classical Keynesian economics.

I also suggest I disagree with your characterizaton of the dergulation history than what you appear to be proposing.

I suggest that a key component of the crisis is the Commodities Futures Modernization Act of 2000 which deruglated credit default swaps. You are correct, this deregulation occurred during good times. It even occurred under a Democratic president. The story here, as I have noted, is best researched by first looking at the Wikipedia article and then chasing the bill’s history through thomas.gov. I suggest looking closely at the role of Phil Gramm who perhaps not incidently appears to appear latter in the economic saga and in the 2008 election.

Since the credit default swap market dwarfs any other portion of the financial markets (references posted earlier), it would perhaps seem that you are focused on the wrong walnut in the classic shell game.

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Hi. I was reading your posts. Are you an economist? A professor? Insightful thoughts. I was wondering if you’d be able to respond to a question I had regarding the current crisis.

Why does it appear that liberals follow Keynesian economics in a recession but refuse to “regulate” in times of economic upturn, when perhaps it would be an opportune time to be proactive in addressing potentially harmful trends? Seems part of our existing deficit reflects a “government” bail-out that perhaps could’ve been slightly less than what it was if there had been some practical foresight several years ago.

This was the case back in 2006 I believe when the Bush administration wished to “regulate” the mortgage companies. But Senator Frank and others mentioned he believed such oversight wasn’t necessary.

How does one describe an economic policy which flits back and forth between a Keynesian system and an unregulated free market?

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now I suggest your comment:

“If Obama and the left REALLY believed we were in desperate economic trouble, there is no way they would have boorowed and spend in unprecidented irresponsible proportions, enslaving us, our children and our grandchildren to enormous debts and deficits.”

is either grossly misinforrmed or seriously disingenuous.

Standard economic theory for managing recession is based on the Keynesian model of governmental stimulus in times of recession. The following perhaps will provide some further discussion on these points:

http://en.wikipedia.org/wiki/Keynesian_economics

And this is the economic model which is most typically followed by cenrtrist and liberal politicians during a recession.

Tha contrasting approach you appear to suggest was explored by Hoover in the late 20s and early 30s and by Roosevelt latter in his period in office. In both cases the impact on the economy was extremely destructive and politicians have been loath to follow it since.

by contrast during periods of relatvie prosperity, government should try to reduce deficits and porepare for the nearly inevitable economic downturn in the future. It is notable that Clinton did so and Federal deficits were redcued. By contrast Bush did not do so and deficit ballooned during his administration.

In short, the charitable explanation for your argument here is that you would appear to be allowing your ideology to blind you to both the actual theoretical framework for the political and economic mainstream on this issue and have blinded yourself to the clear data demonstrating the folly of your proposal.

I suggest that this should casr clear doubt upon your credibility..

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when you state:

“The challenges of the 70s are what caused the struggles of the early 80s, the same struggles that President Reagan pulled us out of and gave us enough economic strength and growth to last through the end of that century.”

I merely note that I have provided a series of references which suggest the seriousness of the present challenges to the economy and health care. You appear to suggest that your mere ascertation of what you apparently believe is sufficient to establish it as fact.

The reader can of course explore the issues for themselves (I have provided links which may perhgaps assist them in this exploration), but I suggest that the electorate has already judged, and your assertions have been judged wanting.

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