Stock markets took a dramatic dive on Thursday, sparked by fears of growing economic turmoil. Is the economy headed for another recession? We analyze recent developments.

Stock Market Plunge 5 August,2011forum

Joseph Grundfest, former commissioner for the Securities and Exchange Commission, professor of law and business and co-director of the Rock Center on Corporate Governance at Stanford Law School and a former director for Oracle
Lawrence White, professor of economics at the Leonard N. Stern School of Business at New York University
Christopher Thornberg, founding principal of Beacon Economics

  • Butler

    The US (federal reserve) dollar is dead as the world reserve currency. This is by design, as the international banking cartel’s real aim is a world wide currency, which they call the bancor.

    • Why would they do that? Banks make huge sums of money brokering currency deals, selling currency fluctuation insurance and they have completely captured the federal reserve.

  • I’m surprised the sell off is viewed as economy related.  My take is that this what wall street does to turn a profit.  They bid the stock market up to where they can’t justify it, then they dump stocks to start over again (profit taking).  Wall street can’t let the market sit idle at the top, because turning a profit by picking a winner is more difficult.  If they dump stocks, start at the bottom again, it is easier to turn a profit.  I see the sell off as profit taking and as wall street’s well connected colluding to issue a massive sell off.

    • SF94116

      I agree. The stock market is a game for professional financial gamblers. Once they sense a sell off they jump in because it only costs a few dollars to make a trade. It’s a cattle heard mentality. Follow the money. Take your profit and then you have the option to buy it back for much less. The foolish cry uncle and lose.
      Is it a coincidence that it happend on President Obama’s birthday? The market also took a bath on January 20, 2009 (Obama’s inauguration).

  • Steve

    What do the guests think of the possibility of the deb problems in the US causing a crash of the dollar?

  • One of the guests mentioned that we need more fiscal stimulus. I find this troubling because that does not appear to be born out by the facts. If the Keynesian models were correct the fall in spending following WWII would have been followed by another Great Depression. Yet as we all know the economy soared. Historical data should inspire much skepticism in the ability of expansionary fiscal policy to stimulate growth. So before we go and incur a bunch more debt, maybe we should take a deep breath and consider the historical record.

  • False. False. False.  When the top marginal rate was 91% the highest tax bracket started at between $2.8 million and $3.6 million in today’s dollars.  The top bracket was nowhere near $200K during the ’50s and ’60s.

  • Vivian

    Do VAT taxes shift tax collection from corporations to consumers?

    • No. Traditionally the seller is responsible for paying the VAT.

      • Bill_Woods

        Eh. Alice pays money to Bob, and Grover gets a cut of the deal. You can view that cut as coming from either Alice or Bob. In the case of sales or VA tax it probably makes more sense to say the consumer is paying, though the corporation takes care of the paperwork and delivers the money.

         “Corporations don’t pay taxes, they collect taxes.”

        • The question by Vivian was concerning the “collection” of the tax. That means who files the paperwork and sends the check. That is done by the seller in most places with VAT.

          The incidence which is who bears the cost of the tax is shared between the consumer and the producer to varying degrees depending upon the elasticity of the demand for the product. Consider this: If you could just pass on the whole tax to your consumer, that would mean your consumers would still buy the same amount of your product at the higher price. If that is the case, why would you not have already raised your price to that level? So necessarily, you cannot raise your prices by the amount of the tax without loosing more money from lost consumers than money gained from the increased price. So, you must let the tax eat into your profit by some amount. By how much depends upon the elasticity of your consumer’s demand curve. The more consumers are willing to do away with your product if you raise the price, the more of the tax you must take on.

  • J Swails

    One of your guests repeated the specious idea that both parties are beholden to extremists. That’s utter nonsense. We have two parties in the US – one is centrist by any rational meaning of the word, and the other is run by insane people. This ridiculous claim that “both parties do it” has to stop. Ask your guests to name three elected Democrats who could be called “extremists”, when compared to Republicans like Ron Paul, Michele Bachman or Paul Ryan. Bernie Saunders? Barney Frank? Give me a break!

  • Fay

    Why cannot student loan borrowers deduct their interest like homebuyers?  We have several generations of students burdened by 20 – 30 years of debt and arguably educating America’s citizens is a higher good than merely buying a house. So why cant education borrowers enjoy the same rules over the life of their loans? 

    • The government already guarantees many of these loans which is a significant subsidy.

  • Why are you following the market minute by minute? It doesn’t matter unless you’re doing short-term trade. It’s irrelevant to everyone else.

  • What do you think when you fill out your VAT refund form when leaving the EU?  Of course the consumer is paying the tax.

    • The question was whether collection was done by consumers. It is not, you just pay $X to the seller who sends Y% to the government. Only refunds are done by consumers. As for the tax incidence, it is shared between consumers and producers like all taxes.

      • All the taxes assessed down the line of production are ultimately paid by the consumer of the product.

        • That depends upon the elasticity of the demand curve. So with the exception of perfectly inelastic goods and services (which practically do not exist) the tax is shared between the producer and the consumer to varying degrees.

          • Elasticity is going to determine my level of profit.   The profit for an item is the difference between my production cost and my sale price.  The cost of producing a good is equal to the cost of the labor, materials, and taxes.   No rational individual would produce a good for more than the good can be sold (excluding *temporary* strategies of selling at a loss), i.e., a negative profit. So the VAT paid along every step of production will be paid by the consumer.

  • guest

    I agree that the mortgage interest deduction is tilted to those with higher incomes and is not progressive. Those who can afford large homes do well with this. Would it kill someone to buy a 4 bedroom home instead of a 5 bedroom home? BTW, every time I have bought a house the real estate agent has tried to get me to buy a more expensive one than I wanted too because “you can deduct the interest”. 

    • Well, that’s the whole point of the subsidy. If they didn’t want you to buy more housing on credit, they would not be giving you more money for buying more housing credit. 

      • guest

        Is that the best use of tax payers money?

        • Not at all. All I’m saying is that is the whole point.

          • guest

            I realize that is the whole point. My point is why is buying a 5 bedroom home instead of a 4 bedroom home a good use of the taxpayers money. 

          • It’s not. Well, it’s a good use of your own money if that’s what you want to do with it. But no, it is not a justifiable way for the government to spend my money or yours.

  • Immigration has a positive impact on growth. Anything apart from Malthusian theory recognizes that fact.

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