WI: Chicago Plan Implemented

The claims about the slowness of the recovery don't account for the slowdown in productivity growth or the slowdown in the growth of our working-age population. Both of which will hold down GDP growth and the latter will hold down employment growth. The reduction in unemployment was in line with past recessions, albeit from a much higher base.

Yes. Thats why most analysts give the recession a few quarters, while others look at how long to get back to where we were.

However if you look at the *employment* data the 2010 to 2018 recovery was not so robust, and I would expect that a look at payroll (or income) data would show it to be even worse. The discouraged worker effect was unusually strong (hence unemployment rate fell even while employment rate did not recover quite so well). And the quality of jobs fell, so income did not recover well (more part time, many at lower wages).

It sems to me that the unemployment rate is not so useful as it once was because there are different socioeconomic structures in society. It is a function of two other variables and they are more responsive to other influences than in the past.
 

kernals12

Banned
I believe these "Investment Trusts" would've gotten most of their capital from stock, that's how mutual funds and private equity firms do it IOTL.
 

Ian_W

Banned
I believe these "Investment Trusts" would've gotten most of their capital from stock, that's how mutual funds and private equity firms do it IOTL.

They aren't investment trusts they are Lending Companies. And a oupleof hundred years of banks show they will leverage to the hilt if they think it will make a buck.
 

kernals12

Banned
They aren't investment trusts they are Lending Companies. And a oupleof hundred years of banks show they will leverage to the hilt if they think it will make a buck.
What does nitpicking my word choice (which is used in the document) add to this discussion?
 

Faeelin

Banned
Doesn't this brilliant plan destroy the very notion of finance and lending?

Hard to see how this promotes economic growth but this might be one of the PODs for a Soviet victory in the Cold War!
 

kernals12

Banned
Doesn't this brilliant plan destroy the very notion of finance and lending?

Hard to see how this promotes economic growth but this might be one of the PODs for a Soviet victory in the Cold War!
Where on earth do you get that idea?
 

Faeelin

Banned
Where on earth do you get that idea?
Requiring 100% reserves for all capital out there destroys the modern banking system, which is based on fractional reserve banking. This is a huge curtailment of capital available for lending!
 

kernals12

Banned
Requiring 100% reserves for all capital out there destroys the modern banking system, which is based on fractional reserve banking. This is a huge curtailment of capital available for lending!
100% reserves for demand deposits. As the paper said, lending companies could issue stock or bonds for capital.
 

Faeelin

Banned
"But think about how much better the American economy would have done with less credit during and after WW2," he said as the Communists conquer Western Europe.
 

kernals12

Banned
"But think about how much better the American economy would have done with less credit during and after WW2," he said as the Communists conquer Western Europe.
With all bank deposits invested in government bonds, there would've been a lot more credit available during WW2.
 

Faeelin

Banned
Repeating something doesn't make it true.

Are you claiming that fractional banking was not how banking worked for centuries? Or are you claiming that if you impose more limits on the ability to lend, that there is the same about of credit available?

Perhaps you are saying that credit isn't relevant to economic growth?
 

kernals12

Banned
Are you claiming that fractional banking was not how banking worked for centuries? Or are you claiming that if you impose more limits on the ability to lend, that there is the same about of credit available?

Perhaps you are saying that credit isn't relevant to economic growth?
I'm saying this plan wouldn't have reduced the supply of credit
 
Yes. Thats why most analysts give the recession a few quarters, while others look at how long to get back to where we were.

However if you look at the *employment* data the 2010 to 2018 recovery was not so robust, and I would expect that a look at payroll (or income) data would show it to be even worse. The discouraged worker effect was unusually strong (hence unemployment rate fell even while employment rate did not recover quite so well). And the quality of jobs fell, so income did not recover well (more part time, many at lower wages).

It sems to me that the unemployment rate is not so useful as it once was because there are different socioeconomic structures in society. It is a function of two other variables and they are more responsive to other influences than in the past.

As someone running a construction business I can validate all that. I did not see recovery in profitability in contracts and volume until 2013. Six years after the crash. But wait, thats not the whole story. The construction industry was in serious trouble as early as 2003. Between the steel & lumber tariffs taking effect 2001-2002, the large ramp up in materials & insurance prices post Katrina, overbuilding in the residential sector, subsequent stagnation of prices; all were in place 2002-2005. While other sectors were in decent shape we were being hammered.

Logically there should have been a shake out of the construction industry circa 2003-2006. For whatever reasons that did not occur & the same stupid mistakes were compounded several more years. Nation wide, and regional construction companies like CP Morgan or Beezer Homes were dead men walking, kept upright by a inability in all directions to accept reality.

My cousin was VP of a small and conservative midwestern bank in those days. We did not meet often, but 2002 to 2010 we together watched the slow motion freeway pileup. Once or twice a year discussing the unfolding insanity over coffee at our business meetings. A retired economics professor & old friend added his perspective "Carl, the trouble with accountants is they think their numbers have something to do with reality." At the time I wondered where the obviously due recession was in 2005. The construction industry was 'Flame Out' but the financal industry attitude was all rainbows and unicorns. I'm convinced that had the necessary shakeout come in 2003-4 most of the long term damage of 2008 would have been avoided.
 
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