What Caused the Last Recession

Posted by dbhalling 9 years, 7 months ago to Economics
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Peter Thiel makes my point that the last recession was not mainly about the financial crisis, but a crisis in technological growth. A point I make in both of my non-fiction books
SOURCE URL: https://www.youtube.com/watch?v=HOB7nezuQ7g


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  • Posted by johnpe1 9 years, 7 months ago
    our tech growth was not strong enough to support
    the politicians' giving homes to people who could
    not afford them??? -- j

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    • Posted by khalling 9 years, 7 months ago
      well it was a factor. Because the US chose to guarantee those loans , of course banks saw less risk and money naturally flowed there. However, if certain perfect storm of regulations (which dried up VS investment) and weakening of the Patent system (why invent if I can't get a patent)-the tech market would have continued booming through the 2000s and that would have off-set the mortgage crisis. new technology is wealth creation, but the real estate market has some wealth creation but they make their money off the same banking and fed central banking we all complain about.
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  • Posted by jnnrd54 9 years, 7 months ago
    The passage of the Community Reinvestment Program (CRA) was the begining. This act forced the banks to lend to people who were not qualified. Then came the Government Sponsored Entities (GSE's) [FannieMae, Genny Mae, etc.] that were encouraged by the government to accept "liar loans" to increase housing sales. A liar loan was one where the applicant wrote down the amount they claimed to have made but the information was not verified by the lenders/brokers. those involved gave a nod nod wink wink - the only ones at risk were the tax payers when the sh*t hit the fan. And now, there are mortgages with only 3% down. Another problem waiting to happen.
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    • Posted by 9 years, 7 months ago
      Those are all details. The real problem is the US is not creating new technologies at the rate they use to.
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      • Posted by $ jbrenner 9 years, 7 months ago
        While you are right, db, that inventors are not inventing, I disagree with your dismissal of jnnrd54's description of the crony mortgage business as being details. The crony mortgage business was actually a major reason for inventors not getting financial backing. Why should they invest in inventors where this is a risk when they can financially enslave millions with no fear of risk? After all, they are too big to fail! When the financial incentives of free enterprise and invention are removed, free enterprise and invention disappear.
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  • Posted by Herb7734 9 years, 7 months ago
    Lack of motion leads to rust. History illustrates this when we contrast Greece and Rome with the Middle Ages. The constant innovative movement which invigorates and changes economies, attitudes, and habits is what keeps humanity growing. If it stops or is made to stop, things will not just even out, things will decline. In our own time, the repressive nature of the Soviet Union led to a lack of progress illustrated by products made in a shoddy manor, 5 year plans that never worked and technology that only existed through stealing it from others.
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  • Posted by j_IR1776wg 9 years, 7 months ago
    Dale you once commented that our patent application forms had been changed from Inventor to First to File. How much of the slowdown do you think is attributable to underfunded inventors facing the David and Goliath effect?
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    • Posted by 9 years, 7 months ago
      I think that under funding of inventors is a huge part of the slow down in the US economy. Why they are not being funded includes many changes to our patent laws, but also changes in our securities laws, changes in our accounting rules, and just over regulations and taxation generally.
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      • Posted by woodlema 9 years, 7 months ago
        I head a point made during a discussion of "totally free unregulated market" and that causes an entire industry to thrive.

        I never thought of it before, but "Religion" is a totally free unregulated market, that thrives, and continues to expand in the USA as opposed to Europe, and that is due to lack of Government.

        Britain still promoted the Church of England, and the government is well invested into religion and over the years religion is losing year after and over year.

        We cannot count Isis and Muslims because that is join or die.

        But in the USA Religion continues to expand with more and more churches, and more and more people joining one religion or another, or Atheist groups, or Agnostic groups. All because Government for the most part is totally out of the "God" business.


        Want to KILL religion, get Government to Regulate and Promote a State Run Religion. Oh that's right the 1st Amendment would have to be wiped out for that.
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  • Posted by $ blarman 9 years, 7 months ago
    The last recession was caused simply by too much government. The housing crisis was caused by governmental coercion of lenders to approve questionable loans and the government's housing authority then buying those loans. Add to that all the corporate bailouts of entities such as GE and GM as well as several large banking conglomerates, and you get a huge transfer of wealth from the private sector to cronies.

    And the greatest collapse hasn't even happened yet.
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    • Posted by 9 years, 7 months ago
      While that is true, that explanation misses the point that the only way to increase real per capita incomes is by increasing our level of technology. As a result we need to focus first and foremost on what is keeping new technologies from being created and disseminated.
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      • Posted by $ blarman 9 years, 7 months ago
        Um, so I thought of a half-dozen different replies to this, but just settled on this one.

        I just recently heard from someone who attended the cyber-security conference last month involving NSA, Secret Service, DIA, etc. His admonition: technology is making us _less_ secure - not more. He said that if you have a social media account - it's been hacked, and not just by the NSA, but by the Russians. Facebook? MySpace? LinkedIn? Gmail? All are insecure.

        I don't look at technology itself as being anything more than a tool. And every tool comes with the danger of hitting yourself on the thumb with it - or having someone else hit you over the head with it. Because at the end of every piece of technology is the one wielding it. THAT is my concern: people.
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        • Posted by 9 years, 7 months ago
          It's the only tool we have for becoming wealthier.

          The spying problem is not a technological problem, it is a moral problem. Governments tracked every little detail about their citizens long before the internet.
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          • Posted by $ blarman 9 years, 7 months ago
            "It's the only tool we have for becoming wealthier."

            I would argue that it is man's ability and desire to work hard that makes him wealthy. Your second question outlines things even better.

            "The spying problem is not a technological problem, it is a moral problem."

            100% agreed, and that was my point. Technology is a tool - it is ultimately the people and their morality that determine the use of the tool and therefore productivity. But it is a mistake to argue that technology independent of morality is a path to wealth. The great line from "Jurassic Park": "Yeah, but your scientists were so preoccupied with whether or not they _could_, they didn't stop to think if they _should_."

            "Governments tracked every little detail about their citizens long before the internet."

            Which governments are you talking about? None that existed prior to the Internet ever had the scope and interconnectivity that exist today. The GRU of the Soviet Union and the Mao-led Reds only wished that they had something this powerful in the 1950's. Hitler, too, would have loved to have had something as detailed. I'm failing to see anytime except in very recent history where such a claim can be made.
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            • Posted by 9 years, 7 months ago
              Right - you think you work harder than the people in the 1600s? You would have to work 50 times harder - that is impossible.
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              • Posted by waytodude 9 years, 7 months ago
                You are right I have a small ranch and have not the most advanced machinery while the Amish only a few miles away use actual horse power work harder than I can imagine. I would still like to see most city dwellers come and spend the day with me. I have found most people are fools for thinking they work hard. It's the thinkers of yesteryear that has made life so easy today. We need thinkers now to progress or we run a risk of going back to the 1600s. It will be those Amish down the road from me that will survive.
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              • Posted by $ blarman 9 years, 7 months ago
                Good grief. Is it really that hard to agree on the matter?

                I've grown fruit and vegetables all my life by hand with a hoe and shovel and it's not much different than what they did back in the 1600's. It's long, hard, back-breaking work. If you want to compare a farmer from the 1600's with a farmer of today, they both still work their butts off, but the modern farmer has a tractor and weed killer which allow him to effectively cultivate thousands of acres in the same amount of time it would have taken for a peasant from the 1600's to cultivate only a few. And no one is arguing any different.

                The equation, however, hasn't changed from the 1600's to now: Productivity = work x coefficient of technology. Let's say the hoe and shovel are a coefficient of about 1 and the tractor and weed killer is the coefficient of about 1000 (plug in your own figures if you don't like these). It still doesn't change the outcome when work = 0. And as per your point above, I can use that tractor to either till my own fields, or ruin the fields of my neighbor - which I choose to do is all up to my morals.
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  • Posted by term2 9 years, 7 months ago
    I think what caused the last recession was the just-before-that expansion fueled by printed money. People are expecting constant and major economic growth ALL the time. When it doesnt come, the government prints money through the federal reserve to artificially give us the benefits of growth by borrowing on the future. A recession like 2008 happens when the rubber meets the road. Why we feel we HAVE to have all this growth regardless of reality is the problem. Technology is one of the factors, but there are a lot more- availablity of resources, how hard people want to work, their education level, competition from outside sources, etc.

    Technology gives us new things to buy, but without the money to buy them, it does no good unless we buy less of something else.
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    • Posted by 9 years, 7 months ago
      No technology does not. It is the only way to increase real per capita income. When incomes are not growing it is because our technological growth is slowing down or stopping. If the Fed had not been created and we had the same technology as in 1913 then we would be no wealthier today.
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      • Posted by term2 9 years, 7 months ago
        But increases in real per capita income can also come from newfound resources or everyone working just more hours or smarter. Technology is for sure one of the things that lets us do the business of staying alive in a shorter time, and I agree that we have grown to expect advances in technology to match our expectations in economic growth. But what if our expectations are just too high to be met by technology, resource, or working hours? Then we historically have relied on the federal reserve to print up money and fool us into thinking we are richer than we really are- at least until the inevitable crash comes.
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  • Posted by $ jdg 9 years, 7 months ago
    I don't buy it. The lack of tech progress is a result, not a cause. When business people have to spend more and more of their time, money, and energy keeping up with the latest overregulations, and the system makes funding scarce, advances don't happen. (And of course our wages stagnate *because* we're now competing with workers in India who spend much less for rent and other living expenses than we do, another result of overregulation and overtaxation.)
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    • Posted by 9 years, 7 months ago
      Increasing levels of technology are the only way to increase real per capita incomes. All the other problems are the result of things that impede it.
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      • Posted by $ jdg 9 years, 7 months ago
        I suppose that's true if you count things such as teaching workers better skills as new technology.

        I don't think it's useful, though. It's like saying that all deaths are caused by lack of oxygen to the brain.
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  • Posted by wiggys 9 years, 7 months ago
    WOULD YOU BELIEVE THE ONE AND ONLY UNITED STATES GOVERNMENT!
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    • Posted by 9 years, 7 months ago
      Yes, but what is it about the government that caused the recession? Thiel's point is that the recession is more a symptom of slowing technological growth than any of these other explanations. For instance, the Austrian's favorite - it was the Fed's fault. Perhaps it contributed, but the lack of technological growth is the real important issue in the long run.
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      • Posted by freedomforall 9 years, 7 months ago
        Without the actions of wall street and the banksters in the 90s promoting mal-investments and taking the opposite positions of what they were assuring their customers were prudent investments, there would not have been any runup and collapse of share prices, no runup and collapse of real estate prices, no severe economic recession.
        Would there have been a normal pull back based upon market activity? Yes, and some weak businesses would have failed while others prospered. Just the fall off of activity dealing with the millenium bug in software might have caused a mild pull back in economic activity. However, the market would have recovered to stability and there would not have been a devastating loss of investments and retirement funds of millions of people. This was caused by fraudulent promotion of mal-investments that would likely have been used to fund more rational uses including technology.
        The government protected and promoted bankster cartel (including wall street) is primarily responsible along with socialist policies of government.
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        • Posted by 9 years, 7 months ago
          While that is true, that explanation misses the point that the only way to increase real per capita incomes is by increasing our level of technology. As a result we need to focus first and foremost on what is keeping new technologies from being created and disseminated.
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          • Posted by term2 9 years, 7 months ago
            actually as an engineer, I can see a number of things slowing down technology. First of all, the legal liability of trying something new is a real damper on innovation. You can lose more than you ever made in lawsuits (the reason I try not to make items that could result in lawsuits) . Secondly, having to meet government restrictions that are based on cronyism (the reason I dont make medical devices anymore). Thirdly, the level of technology rises every year and it makes it harder to keep up with the ever rising bar. The things I learned at MIT years ago are pretty much useless today. I have had to learn a LOT of new things just to keep up- and I am no whiz at where the real money is made today.
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            • Posted by 9 years, 7 months ago
              But new technologies mean you do not need to learn a lot of things that you use to have to know - how to operate a slide rule as a trivial example.

              The increases in technology have been constrained to ever narrow areas by regulation. Take housing. Building codes mean we have essentially the same buildings and houses today that we had in the late 1970s. Cars have hardly changed. Airplanes still fly subsonic and on and on.
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              • Posted by term2 9 years, 7 months ago
                In my case, I am right now having to learn about computer programming in order to compete with the chinese and people from india. Without that knowledge, I will fall behind them (as we have already as a country)
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          • Posted by freedomforall 9 years, 7 months ago
            The loss of capital through government promoted mal-investment (both bankster and socialist driven) is a primary reason. In your field of expertise, government has not done the job of protecting property of inventors either, but bottom line is if you waste your capital to support existing power through war or fraud there is much less capital to promote technology and other rational uses.
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        • Posted by JCLanier 9 years, 7 months ago
          Freedom:
          Good review of major points that are verifiable and quantifiable.

          Technological stagnation... while it may be more difficult to pinpoint exactly what-where-when, it is highly probable that this too has occurred. The U.S. has been lagging behind in almost everything for years now. I agree that the Government juggernaut of over-regulation has strangled American businesses which has drastically curtailed their initiative towards funding research, delaying investing in higher/advanced technology and resisting expansion which implies the use of all the above stated.

          If we are to see a recovery that is both solid and healthy then, as db states, we must create technological advancements and regain what was once the crowning glory of the U.S.
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      • Posted by wiggys 9 years, 7 months ago
        Let us look at reality- the USG has been injecting itself for over 100 years into the economy of not only the USA but much of the rest of the world and the end results so far have not been very good, have they(?). The actions taken by the banks have been significantly influenced by the government haven't they (?) So you can talk all day long about Austrians or any other economist but the end result thus far has been inflation to beat the band an increase in poverty to beat the band a decrease in the size of the middle class to beat the band and this is local, what about the vast increase in poverty world wide, and of course there is WAR that destroys to beat the band. All because of the interference of economics by GOVERNMENT. Do you for see any changes to the positive, if so let me know what they are.
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        • Posted by 9 years, 7 months ago
          Yes, let's talk about reality. Even if we had no Central bank, but we had the same technology as we had in 1913, then we would be no wealthier. The Fed is a side show - it certainly should not exist, but the Austrians are tipping at windmills.
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          • Posted by freedomforall 9 years, 7 months ago
            Those windmills are the primary reason why there is a lack of funding for advancement of technology.
            I think I understand your (and Thiel's) view of the problem. He gives no real solution. What is your solution?
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            • Posted by 9 years, 7 months ago
              It certainly does not help, but actually the major issues were the weakening of the patent system, changes to our securities laws, like Sarbanes Oxley, and changes to our accounting rules
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            • Posted by term2 9 years, 7 months ago
              I would dispute that there is a "problem" needing a solution. The growth rate of the economy is a result of a lot of factors- resources, education, amount of work people want to do, etc. All a person can do is to increase HIS economy through more work, more efficient work, and things like that. The end result of the efforts of all the people in the "economy" will decide how fast the "economy" grows.

              The government cant force feed the entire economy in the long term. Whatever it does to prime the pump in the beginning results in a slowdown later to probably a bit less than what it would have been if the government stayed out of it.
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              • Posted by freedomforall 9 years, 7 months ago
                There is a problem, in my opinion, and it is government interference via both socialism and corporatism via the banking cartel. Other government interference also plays a part, e.g., the EPA. Government has expanded their role to "promote the general welfare" in ways that are counter productive to that goal, and simultaneously completely abdicated the job to "secure the blessings of liberty."
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                • Posted by term2 9 years, 7 months ago
                  totally agree. if the government stayed out of things, and the federal reserve wasnt around, I think we would grow at some sort of sustainable rate and things would be better for everyone in the long term
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                  • Posted by wiggys 9 years, 7 months ago
                    at what point do you think the government will back off? my opinion NEVER. That being said there is again in my opinion never going to be a return to the honest businessman doing what he does best. so we are doomed to see the perpetual demise of the country. I have no answer other to say if the people who run the country were to just die off and not be replaced then the welfare state would come to an end since there would no longer be any administrators there might be a chance. just think about what your children are facing for their future, a ball and chain so to speak.
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              • Posted by 9 years, 7 months ago
                The only way to increase real per capita income is to increase your level of technology. Now there are many different things that can slow the growth of new technologies, but only one thing that can cause real per capita increases in wealth.
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                • Posted by term2 9 years, 7 months ago
                  Other things influence per capita income- like newfound resources, and harder working people- without any change in technology at all. They can also subtract from the effects of improvements in technology.
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                  • Posted by 9 years, 7 months ago
                    Without changes in the level of technology the best you can hope for is to optimize the economy. After that there cannot be any real per capita increases in wealth.
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                    • Posted by term2 9 years, 7 months ago
                      I think you give too much weight to technology. Or perhaps you have a wider definition of it than I am assuming
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                      • Posted by 9 years, 7 months ago
                        An invention (technology) is any human creation that has an objective result. The only way we can get wealthier on a per capita basis is to create new inventions. When the rate of new technologies slows, so will income.
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                        • Posted by term2 9 years, 7 months ago
                          China hasnt really invented anything new, but their per capita income is soaring, because it was so low and is now coming up to world standards while our per capita income is falling.
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                          • Posted by khalling 9 years, 7 months ago
                            Yes, because they are using the technology that 1st world countries that had strong patent systems built. They can only do this so long. This is the way historically 2nd and third world companies advance. Off of the technological disruption of an economically free country. This is big picture looking.
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                          • Posted by khalling 9 years, 7 months ago
                            The internet, transistor, micro processor, PC-all of these is disruptive invention. -Overnight (not really) these concepts go across all industries-create jobs which did not exist before (which are skilled and highly skilled jobs) like a patch of mushrooms coming up. That is true creation of wealth. What's happening in China-they are using our technology (often stealing it) and right now they are pulling up working class and poor into a thriving middle class. It's to be applauded. It's the technology created earlier. They are replicating-they are not creating disruptive innovation.
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                            • Posted by term2 9 years, 7 months ago
                              You are assuming that all the disruptive technologies create more jobs than they make obsolete. Some do, and others don't. I could argue that in the end many of them just make people work harder to stay even. The computer doesnt made me any more money that I did before- it just forced me to use it in order to compete effectively now. Same thing with email. I send many more communications than I used to when snail mail was the only way, and again I have to do that to stay competitive, and without a secretary. Automation is a lot more common now than earlier and the advances robots will replace a lot more workers in the future than it will take to build them (mostly will be built by other robots). If total wealth is the sum of the wealth of individuals, wouldnt you say that Russia is more wealthy than it used to be because of the oil its now selling- maybe not forever, but now. Its citizens dont have the wealth because its been stolen from them in the form of the ruble, but the wealth is there in the government coffers.

                              I think technology can improve living standards, but I still think its not the only thing, and sometimes it improves the living of some and reduces it for others.
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                              • Posted by khalling 9 years, 7 months ago
                                term, I'm checking which website you are on. Yes, some jobs become obsolete. They are the lower skilled jobs because your economy is getting technologically savvy. However, If you disrupt enough to turn your city into a higher percentage of skilled workers, earning more, they buy stuff. They remodel. They build new homes, get high end toys, hopefully they have more time to study philosophy or go up their science degree one notch. You are arguing against moving into an information age and letting 2nd and 3rd world countries concentrate on an earlier evolution of the US-manufacturing. But we don't stop manufacturing. We figure out how to do it better, with higher quality materials-and get it to be done in your house on your table-one offs. You have lots of fear about tech for being an engineer.
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                                • Posted by term2 9 years, 7 months ago
                                  I can't tell you why but I don't fear change. In my current business I use the Chinese for what can do cheaper but I fill in the gaps in what they can't do , at least yet. I could make most everything I buy from them, but it's cheaper to just buy from them (mostly because of high employee costs here)
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                                  • khalling replied 9 years, 7 months ago

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