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View Full Version : AIG pays executives and the New deal didn't work


Dr Goofy Mofo
March 17th, 2009, 11:32 PM
News reports that $165 million dollars is to be paid a bonuses to the executives. This outraged Obama and I guess my senator from Iowa who told them to resign or kill them selves. Recently 11 of the bastards who got $1 million or more bonus resigned. 73 of the executives got a million or more. This has been pissing off the government and they are trying to find a way to either undo it, prevent it or tax them. It has just got outta hand.

Another thing happening is that the conservatives are saying the New Deal did not work and that the world war 2 took us out of the depression. Cause mass creation of temporary jobs and government spending didn't do it, it took mass creation of temporary jobs and government spending on war instead. Real genius... fox news! But fox news is not the only one trying to rewrite history the ny times has joined in as well as other news providers.They are stating that FDR's plan made the depression worse not better. Some are saying it didn't open jobs but made unemployment worse.

Some Citations:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5927055.ece

http://money.cnn.com/news/newsfeeds/articles/djf500/200903171544DOWJONESDJONLINE000628_FORTUNE5.htm

http://www.nytimes.com/2008/11/23/business/23view.html

http://www.cato.org/pub_display.php?pub_id=3357

Yiuel
March 17th, 2009, 11:49 PM
As for AIG, that is just ugly. One more reason why I shall leave in due time.

As for the other, to make economy work, you have to pour ressources in it. In our modern time, this would be... money. So Obama's plan, pouring loads of money, will have an effect. We just have to let it some time.

rmw
March 18th, 2009, 12:33 AM
Yiuel, I understand what you're saying, but if you're going to spend a lot of money trying to fix a problem, you need to be sure the money will be spent wisely first.

Dr Goofy Mofo
March 18th, 2009, 12:47 AM
And not giving to people who are going to take it and move to Cocomo.

Yiuel
March 18th, 2009, 01:27 AM
Obama could have destroyed all contracts made by AIG. But then, he would have destroyed any faith to be given in contracts, and those ugly money-holders could have panicked and everything could have gone worse.

I agree that you have to spend your money wisely. In another thread, the silly one about "what if we all followed the ten commandements", I have answered in detail that if you spend money on waste, you'll just won't be able to get anything back.

War is among the most wasteful way to imput money into a system. Not that it doesn't work : you pay your soldiers and big military companies. These in turn will spend part of that money for services, the same way any investment should be boasting the economy. However, with war, part of the people and a whole lot of the ressources being spent are wasted in destruction (and further destruction of other ressources, if we may add). So, if you spend 50 billion dollars to create a train system and 50 billion dollars to wage war on the silly neighbour :

- In the first case, the whole 50 billion dollars will be worth it. Part of it will be immobilized in the train system (not helping the economy further directly through the virtuous circle of investment), but this train system will be useful for other purposes for a long time, without needing to invest in it again. What's left will be used to pay all the employees who will, in turn, want to buy things to live, which will finance a second level of employees who will in turn wish for services etc. etc. creating the Virtuous Circle of Investment.

- In the second case, everything is pretty much the same : that's why investing in war isn't much different first from investing into infrastructures (institutions and wealth producing companies). However, remember that in the first situation, the train system is still there to be used when all is done and well running. Not in the case of a war : some of your people are dead, and all the munitions are now waste in the battlefield. And were not counting the infrastructures destroyed in the process, leading to further waste. So part of the money you invested is now waste. And part of the former immobilized stuff is also waste. So it's no good in the long run.

However, what helped the US economy? One of the largest such plan ever created : http://en.wikipedia.org/wiki/Marshall_Plan

Today, we might smile at the 13 billion dollars spent, but it is, approximately, what is now investing Obama. And all this was for the reconstruction of Europe. (A similar plan was given to Japan after the occupation. But here, a second war, and one that favoured the developpment in the same way as America during the war.) All this boosted everything to the economy we know now.

---

In Obama's case, I am sure there were probably more ideal ways to spend money. But there are other risks when breaking contracts by presidential laws. Our societies aren't ready yet for such widespread use of power without resulting panick among those who are affected. He's already taking a deadly risk, for if he fails, no one else will ever bring back what was.

Also, on of my favorite blogger always says : If something is good, then a little bit of that something will do a little bit of good. Japan is, again, a good example. In Japan, they were suffering from a bubble crisis since 1985 already. You know, that Japanese housing bubble now long forgotten? It exploded, the same way the American one did. Japan never recovered.

At first, I feared that it would be so with the American bubble as well. But now, I have understood why Japan never recovered, despite plans akin to those now being made by Obama. It's not that Obama's plan will fail, it all comes up to the size of it. Japan did small short term plans. Read SMALL. All those plans did some good : the Japanese people never became poor in anyway near how most Americans are. (The middle class Japanese is substantially richer than the American one, even today.) But since they were small, they just had a small effect, and that is what can be seen, if we follow the invested money with the economical growth : they directly correlate, up until 2006.

And what happens then? Well, the American Housing Bubble. This created a cash flow for goods (by overborrowing, which financed workers to buy more into an endless circle of overdebt), and a substantial part of it was used to buy japanese stuff (you know, like Toyota cars) This boosted the japanese economy like nothing else. (I was in Japan when all this went well like that. I didn't knew at that time what was happening)

And then, kaboom again. And now, Japanese is going VERY low. To levels yet unseen since decades. But I am getting away from my point. No matter what Obama does, if he makes money available for further investments, it will have some effect. The more the better, as it seems. You just need to do more than what Japan did, and avoid the dangerous and disastrous circle of overlending creating housing bubbles (which will destroy any effect your plan will have had).

Tsar Phalanxia
March 18th, 2009, 01:28 AM
I hardly think Obama meant to spend however mant billion it was solely on bonuses.

http://www.guardian.co.uk/business/2009/mar/17/barclays-guardian-injunction-tax

Related

winwun
March 18th, 2009, 12:11 PM
To cut through all the immature "purple prose", it can be succintly stated that a consumer economy is a good economy, and war is a consumer.

tagnostic
March 18th, 2009, 12:18 PM
take the money
shame on you
give the money
shame on me

djura
March 18th, 2009, 01:00 PM
To cut through all the immature "purple prose", it can be succintly stated that a consumer economy is a good economy, and war is a consumer.

Then, why are we not all milliners?

Consumers is only as good as the amount of resources (money) he puts back in the system. Let's imagine for a sec that you take a stick of dynamite and blow your car up. This means no more car, no more buying gas, no more service for friendly mechanic, no more insurance, no more tax when registering a vehicle, no more tickets for bad parking, no more car fresheners, tires, bad headlamps that need replacement, no more car wash, polishing, waxing, aftermarket equipment, and no more jealous neighbor for you cruise in a better looking ride then him.
Sure you say, I'll just pay a trip to the bank and get my self a brand new one.
Provided you could actually do that, the value you leased consists of component A (car price) + component B (interest rate) + tax. The interest rate is further reinvested into additional credits and leases to other people that are'nt necessarily able to pay them back (pretty much something we have now). Note here, that leasing companies have but wary little own capital (mainly buildings that fluctuate in value, depending on balance between offer and demand, and office equipment that constantly drops in value, as it gets older). So by getting a new car, you create instant profit for the company that build a car and the government, but you leave a whole lot of people from reinvesting back in the system.

In war, shit gets blown up all the time, and money invested basically gets destroyed. Military doesn't create any surplus value, doesn't manufacture anything, and, most importantly doesn't have any capital of it's own. It feeds on taxes that come from other people's earnings, and by blowing stuff up only destroys money already earned.
Sure, the busted tank well have to be manufactured again and part of it's cost should end up back in the system, but let's not forget money needed for this comes from the same source. The busted tank now cost 12 million dollars instead of 6 that got blown up. So for every time something is destroyed if sucks in more and more money until one of the sides in conflict can no longer sustain the cost - this is when the wars are won or lost.

Tsar Phalanxia
March 18th, 2009, 02:33 PM
Technically, he's right in that it provides for R&D, that could be used for future technology, but that's like justifying the 72 million people who died in WW2 just so we could have computers...

Oh, and a consumer economy is dumb. It relies on the money going around the system, and for the speed the money circulates for the economy to grow. Of course, as people won't go shopping every day, this is replaced by credit, which means when your economy slows down it's spinning, you realise you've piled a load of debt on top of it, and it comes crashing down.

Perna de Pau
March 18th, 2009, 05:18 PM
A Republican Senator suggested that AIG’s executives should resign or commit ritual suicide in shame over the bonus payments, the details of which emerged at the weekend.

This is what I call a wise suggestion :D

Yiuel
March 18th, 2009, 05:23 PM
Seppuku is a bad idea. They'll just be escaping.

Make them suffer, make them live through the harshness they have caused, turn their life in a shit so unbearable that they wish they would be killed at any time.

tagnostic
March 18th, 2009, 05:57 PM
it's a lot like being a weatherman
what other job can you get right
only 1/2 the time and get bonus pay?

sudikics
March 18th, 2009, 06:59 PM
Question: where does the law say that Congress can't tax more than 100% of the bonuses? :icon_twisted:

Tsar Phalanxia
March 18th, 2009, 07:49 PM
Question: When will America ever adopt such a "socialist" (Rather, "just". Amirite, folks?) policy? :(

Dr Goofy Mofo
March 18th, 2009, 08:01 PM
Jesus would never allow that.

Tsar Phalanxia
March 18th, 2009, 08:19 PM
Hehehe
Jesus was pratically a Socialist. Have you read the Sermon on the Mount?

I don't think Americans would like Jesus today, considering he's a bearded Palestinian, who's ready to die for his faith, and a lefty at that!

Dr Goofy Mofo
March 18th, 2009, 08:32 PM
You are correct sir!

Sister Faith
March 18th, 2009, 11:09 PM
This bs about being under contract to pay these 'bonuses' is just that, BULLSHIT. Since when did any large corporation/gov't (especially an insurance company!) treat any contract signed by them as unbreakable?

These contracts could have been re-negotiated, at the very least. Look at the auto workers unions agreeing to re-negotiate wage contracts, effectively agreeing to salary cuts. If they can go without full salary to save their jobs, so can these execs.

These guys are not going to quit in a huff if they are asked to give up the bonuses. Where would they go? Who else would hire a greedy fuck-up?

Instead of being handed a Golden Parachute, they should have been given a tent and told to go set up shop in one of the many, many tent cities springing up overnight.:icon_evil:

djura
March 19th, 2009, 11:02 AM
You are right sis, but than again...
banking system works is principal like this.
Open up a bank, and offer interest rates on peoples savings. Use savings money to further invest in loans to other people. Interest rate on savings is much smaller than collected interest rate from loans.
The more loans the bank gives, the bigger the difference between provided and collected rates. The rule of banking (at least good banking) is to be able to predict how will the people pay loans back (will they be late, will some of them go bankrupt etc.) and keep the number of bad loans below 1%. This is considered "leakage".
However, the more loans bank accepts, the bigger the profits. Bigger profits mean bigger bonuses. The fault in the system is that bonuses are given away annually, before any loans would actually go bad. In other words, the bonuses are given away for predicted/calculated number of good/bad loans, in direct proportion to number of loans granted to the public.
According to rules specified, bosses have a right to bonuses regardless of them fucking up, and it's only up to the system to stop this from happening.

sudikics
March 19th, 2009, 02:20 PM
http://crisisofcredit.com/

Yiuel
March 19th, 2009, 02:34 PM
Simple and clear. And the final bombs :P

Dr Goofy Mofo
March 19th, 2009, 03:45 PM
AIG is seeking to return half of its bonuses...

http://www.nytimes.com/2009/03/19/business/19bailout.html?hp

tagnostic
March 19th, 2009, 05:01 PM
I still don't get it,
returning 1/2
of your "bonus"
that you got for
Failing?
WTF

Dr Goofy Mofo
March 19th, 2009, 05:24 PM
I think it is only half the assholes are going to return it.

tagnostic
March 19th, 2009, 05:38 PM
so,
we have half-assed exuctives
returning half our money
given to them by
half-witted
politicians
who got half the vote
to take half my pay in taxes?

I'm Half way Pissed Off

Dr Goofy Mofo
March 19th, 2009, 05:44 PM
That just makes me wanna take the ROFLcoppter the the LOLlerskate Factory.