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It didn't grow in the UK

At 11/1/09 05:14 PM, POOPIES wrote:

"The Economy Is Like Popeye". That's the qoute of the mounth!

At 11/9/09 09:57 AM, Der-Lowe wrote:

At 11/8/09 08:10 PM, SmilezRoyale wrote:

At 11/1/09 08:29 PM, X-Gary-Gigax-X wrote: How the heck did that happen? We still remain on the brink of 10% unemployment.

A recession does not necessarily balance itself with a boom afterwards, and vice versa.
The only way in which a drop in consumption now can mean higher consumption tomorrow is if that savings are being channeled into investment. This is not the case in recessions, since businessmen get pessimistic. For example, Net investment went negative during the great depression, despite the increased investment by the decrease in consumption.

That is to be expected. If prior to a recession / depression you have artificially low interest rates one would expect over investment, or loans being made on the assumption that loans are cheaper then they actually are relative to the REAL amount of deferred consumption. I'm not saying that overinvestment is good either. And it makes sense that after the depression of 1929 and the depression of 1920 that you had declines in both consumption and investment.

The other kind of growth involves spending, you spend money you don't have, and say that the economy has improved because people are spending more, this is like going on a junk food binge and measuring your weight and saying 'my economy has grown' or injecting yourself with steroids and telling everyone how your physique has improved.

The thing is that the money being spent exists, in the way of not realized investment. The private sector has a huge amount of funds that is currently not using (that's why NOMINAL interest rates went negative on the T-bills a year ago) , so the government uses the opportunity, and spends them. Since we're in a liquidity trap, there is no crowding-out effect: the government does not displace investment, because the deficit does not raise interest rates (which are zero).

I'm highly skeptical of the notion that someone somewhere has the actual wealth that is backing all of the debt that Americans and their government have accumulated. I mean... Asside from all of the foreigners.

The pitfalls of GDP are more related to its accurate measuring of the level income, (or "utility"), rather than its evolution.
And even if you eliminate government expenditures, the economy still grew. We call that the multiplier effect, and it's greater than 1.
Hooray! suck that friedman.

I'm talking about cases where the money is borrowed or printed by the government. The Tin Pot Dictator in this case would channel the money from foreign aid into military expenditures, or building a golf court for himself.

As for utility, that was my point, but it's almost certain that if Government is spending the money, it's probably not maximizing society's utility.

At 11/9/09 04:08 PM, SmilezRoyale wrote: I'm highly skeptical of the notion that someone somewhere has the actual wealth that is backing all of the debt that Americans and their government have accumulated. I mean... Asside from all of the foreigners.

Pretty much. A lot of the debt was massed up by pretending that real estate was worth a whole lot. The market kept going up because the market kept going up.

At 11/9/09 04:08 PM, SmilezRoyale wrote: That is to be expected. If prior to a recession / depression you have artificially low interest rates one would expect over investment, or loans being made on the assumption that loans are cheaper then they actually are relative to the REAL amount of deferred consumption. I'm not saying that overinvestment is good either. And it makes sense that after the depression of 1929 and the depression of 1920 that you had declines in both consumption and investment.

Actually, you had declines in almost everything, nominally and really.
And that's the problem, there is no real argument here to defend the functioning of the market during the great depression (not to say that it was government spending who pulled the country out of it). If markets worked, there would have been no unemployment, bad investments should have ceased and employment re channeled into lucrative investments, without jumping to 25% unemployment rates.

The other kind of growth involves spending, you spend money you don't have, and say that the economy has improved because people are spending more, this is like going on a junk food binge and measuring your weight and saying 'my economy has grown' or injecting yourself with steroids and telling everyone how your physique has improved.

The thing is that the money being spent exists, in the way of not realized investment. The private sector has a huge amount of funds that is currently not using (that's why NOMINAL interest rates went negative on the T-bills a year ago) , so the government uses the opportunity, and spends them. Since we're in a liquidity trap, there is no crowding-out effect: the government does not displace investment, because the deficit does not raise interest rates (which are zero).

I'm highly skeptical of the notion that someone somewhere has the actual wealth that is backing all of the debt that Americans and their government have accumulated. I mean... Asside from all of the foreigners.

The debt is backed by future tax revenues, which I believe are in the 2 trillion dollars per year.

The pitfalls of GDP are more related to its accurate measuring of the level income, (or "utility"), rather than its evolution.
And even if you eliminate government expenditures, the economy still grew. We call that the multiplier effect, and it's greater than 1.
Hooray! suck that friedman.

I'm talking about cases where the money is borrowed or printed by the government. The Tin Pot Dictator in this case would channel the money from foreign aid into military expenditures, or building a golf court for himself.

The government just takes what's willingly supplied and finds no demand, it has nothing to do with re-channeling something that was supposed to be employed for a good cause into a bad investment. It's about finding a use for money that nobody wants to use, because of a giant market failure in the money markets.

As for utility, that was my point, but it's almost certain that if Government is spending the money, it's probably not maximizing society's utility.

As long as utility is positive, it's better than zero.

At 11/14/09 05:28 PM, Der-Lowe wrote:

Actually, you had declines in almost everything, nominally and really.

Just a reiteration of the fact that the economy needs to contract. in the same respect that being "achy" and warm headed when you have a fever isn't the sickness, it's the correction. I'm not saying that the human body is proof that free markets work though.

And that's the problem, there is no real argument here to defend the functioning of the market during the great depression (not to say that it was government spending who pulled the country out of it). If markets worked, there would have been no unemployment, bad investments should have ceased and employment re channeled into lucrative investments, without jumping to 25% unemployment rates.

As a libertarian i do feel somewhat obligated to study the depression more than I already have, it's a political topic that I'm weak on. I do know, however, that what made the 29 depression different from the one roughly ten years earlier is that the Great depression involved wage and price controls that made the functions of lower prices and lower wages impossible, even during the hoover administration. If wages cannot fall, businesses have no choice to fire workers.

I'm highly skeptical of the notion that someone somewhere has the actual wealth that is backing all of the debt that Americans and their government have accumulated. I mean... Asside from all of the foreigners.

The debt is backed by future tax revenues, which I believe are in the 2 trillion dollars per year.

No individual would have the audacity to say that the 5,000 dollars a month they spend per month is covered by the 3000 dollars per month of future income, but i don't want to insult your intelligence by implying you don't already know that.

The

I'm talking about cases where the money is borrowed or printed by the government. The Tin Pot Dictator in this case would channel the money from foreign aid into military expenditures, or building a golf court for himself.

The government just takes what's willingly supplied and finds no demand, it has nothing to do with re-channeling something that was supposed to be employed for a good cause into a bad investment. It's about finding a use for money that nobody wants to use, because of a giant market failure in the money markets.

Consumer confidence theory... Businesses and individuals don't want to perpetually living 'bare bones necessity' That they underutilized capital temporarily and use what resources they have more efficiently, restructure work to fix the mistakes occurred in the boom is not something to complain about. Americans are learning from their mistakes, both consumers and investors. And now the government and the economic parrots are complaining that people aren't returning to their old reckless behaviors, which is why we need the government to encourage people to return to those bad habits, because the government never learns.

A Kitchen Analogy

If people burn themselves on a stove they'll be disinclined to touch stoves again for awhile, and instead rely on the micro wave, but eventually they're deprivation of well made soups and other stove oriented foodstuffs leads them back to cooking with the stove, but this time more carefully.

Keynes sociology class theory is cute but it's unrealistic and completely elitist, and to be expected from someone with a background like Keynes.

Consumers: are great because their consumption is important, but consumers themselves are dumb, passive, determined robots.

Investors:Dynamic but irrational and crazy, creatures of mood and optimists and pessimists. If they wake up in a good mood one morning they'll invest and if they have a cold the next day they'll sell. So you can't rely on them.

Deus Ex Machina: (government) Supremely rational, especially when guided by top economists like Keynesians, and they can step in and correct the mood swings of the investors. Government expenditures is a form of honorary investment.

I'm not calling you a Keynesian, but your general dislike of investors and bias towards government seems to stem from his interpretation of the three classes.

As for utility, that was my point, but it's almost certain that if Government is spending the money, it's probably not maximizing society's utility.

As long as utility is positive, it's better than zero.

Let the prices of all of the misused capital fall and eventually some entrepreneur, and it won't be stuck in the hands of some political interest group or building bridges to nowhere, building more statues in the capital building, or for paying artists to make eulogies to Obama.

At 11/15/09 10:06 PM, SmilezRoyale wrote:

At 11/14/09 05:28 PM, Der-Lowe wrote:

Actually, you had declines in almost everything, nominally and really.

Just a reiteration of the fact that the economy needs to contract. in the same respect that being "achy" and warm headed when you have a fever isn't the sickness, it's the correction. I'm not saying that the human body is proof that free markets work though.

But you see that there is no reason for wasting 10% of the labor force. If, as it seems to be your argument, there is excess consumption, then, if markets clear, there is no reason for the mechanism not show this new necessary trend to re channel resources into whatever it needs to be produced, be it capital, butter or cannons. A necessary corollary of the assertion of clearance of markets is Say's law, if markets work then they should be able to fix themselves without decreased output, because resources are there to be employed.

And that's the problem, there is no real argument here to defend the functioning of the market during the great depression (not to say that it was government spending who pulled the country out of it). If markets worked, there would have been no unemployment, bad investments should have ceased and employment re channeled into lucrative investments, without jumping to 25% unemployment rates.

As a libertarian i do feel somewhat obligated to study the depression more than I already have, it's a political topic that I'm weak on. I do know, however, that what made the 29 depression different from the one roughly ten years earlier is that the Great depression involved wage and price controls that made the functions of lower prices and lower wages impossible, even during the hoover administration. If wages cannot fall, businesses have no choice to fire workers.

Price controls were imposed in 1933, as part as the new deal. From 1929 to 1933 a deflationary spiral took place. After the New Deal was imposed, the economy started to recover, until it fell into a recession again in 1937 when FDR tried to balance the budget.
After that came WW2, as government spending soared, the crisis was left behind.

I'm highly skeptical of the notion that someone somewhere has the actual wealth that is backing all of the debt that Americans and their government have accumulated. I mean... Asside from all of the foreigners.

The debt is backed by future tax revenues, which I believe are in the 2 trillion dollars per year.

No individual would have the audacity to say that the 5,000 dollars a month they spend per month is covered by the 3000 dollars per month of future income, but i don't want to insult your intelligence by implying you don't already know that.

I'm saying that the US government can collect enough taxes to pay its debt.

I'm talking about cases where the money is borrowed or printed by the government. The Tin Pot Dictator in this case would channel the money from foreign aid into military expenditures, or building a golf court for himself.

The government just takes what's willingly supplied and finds no demand, it has nothing to do with re-channeling something that was supposed to be employed for a good cause into a bad investment. It's about finding a use for money that nobody wants to use, because of a giant market failure in the money markets.

Consumer confidence theory... Businesses and individuals don't want to perpetually living 'bare bones necessity' That they underutilized capital temporarily and use what resources they have more efficiently, restructure work to fix the mistakes occurred in the boom is not something to complain about. Americans are learning from their mistakes, both consumers and investors. And now the government and the economic parrots are complaining that people aren't returning to their old reckless behaviors, which is why we need the government to encourage people to return to those bad habits, because the government never learns.

A Kitchen Analogy

If people burn themselves on a stove they'll be disinclined to touch stoves again for awhile, and instead rely on the micro wave, but eventually they're deprivation of well made soups and other stove oriented foodstuffs leads them back to cooking with the stove, but this time more carefully.

Keynes sociology class theory is cute but it's unrealistic and completely elitist, and to be expected from someone with a background like Keynes.

Consumers: are great because their consumption is important, but consumers themselves are dumb, passive, determined robots.

Investors:Dynamic but irrational and crazy, creatures of mood and optimists and pessimists. If they wake up in a good mood one morning they'll invest and if they have a cold the next day they'll sell. So you can't rely on them.

Deus Ex Machina: (government) Supremely rational, especially when guided by top economists like Keynesians, and they can step in and correct the mood swings of the investors. Government expenditures is a form of honorary investment.

That's quite an imperfect view of the General Theory.
Firstly, Keynes does not use such characterization of economic agents. He does say that some are good, bad, nor believes the superiority of one agent over another.
As any scientist, he studies a phenomenon and tries to explain it. It had been long ago observed (by Marx) that capitalist economies face regular downturns. Neoclassical theory believed this to be effects of friction, situations that arose in between equilibriums. The corollary was that no intervention should be used, the best thing the government could do was to keep its budget balanced, and wait until the private sector fixed itself.
However, these crisis were getting stronger and stronger (also, noted by the first time by Marx), and some did not fix themselves shortly. Before the Great Depression, Britain had experienced a long period of high unemployment, which gave Keynes the upper-hand in the discussion of the Great Depression. And that's basically the core of Keynesian theory: recessions can be managed, through monetary, trade, and fiscal policy.
The State acknowledged the existence of these tools, and has been using them for the last 70 years, with varying degrees of success.

I'm not calling you a Keynesian, but your general dislike of investors

¿?
I never said I disliked investors.

and bias towards government seems to stem from his interpretation of the three classes.

As for utility, that was my point, but it's almost certain that if Government is spending the money, it's probably not maximizing society's utility.

As long as utility is positive, it's better than zero.

Let the prices of all of the misused capital fall and eventually some entrepreneur, and it won't be stuck in the hands of some political interest group or building bridges to nowhere, building more statues in the capital building, or for paying artists to make eulogies to Obama.

The thing is prices never fall enough, and even if they do, the deflation destroys the financial system. As in 1929.

At 11/16/09 12:02 PM, Der-Lowe wrote:

But you see that there is no reason for wasting 10% of the labor force. If, as it seems to be your argument, there is excess consumption, then, if markets clear, there is no reason for the mechanism not show this new necessary trend to re channel resources into whatever it needs to be produced, be it capital, butter or cannons. A necessary corollary of the assertion of clearance of markets is Say's law, if markets work then they should be able to fix themselves without decreased output, because resources are there to be employed.

I feel i may not fully understand what you mean but I'll try.

Output has to decline temporarily because you cannot instantaneously transfer resources from one sector of the economy to another sector of the economy.

It's like building a bunch of houses, if you WERE building seven houses but realized you only had enough supplies to build five, the house builder can't clap his hands and take the resources from one sector to another. In fact, it is quite likely that he'd have to scrap three houses because resources get lost when restructuring occurs.

Heck, not even the government can, with a stimulus package, immediately put resources back to use. During the great depression you still had dismal employment levels, and today our current unemployment (not including people who have given up looking for new jobs or people who have taken part time jobs at McDonalds but are still looking for a REAL job) hovers at ten percent.

As a libertarian i do feel somewhat obligated to study the depression more than I already have, it's a political topic that I'm weak on. I do know, however, that what made the 29 depression different from the one roughly ten years earlier is that the Great depression involved wage and price controls that made the functions of lower prices and lower wages impossible, even during the hoover administration. If wages cannot fall, businesses have no choice to fire workers.

Price controls were imposed in 1933, as part as the new deal. From 1929 to 1933 a deflationary spiral took place.

Which is what should have happened, which is what happened in the other banking panics and recessions in American history.

After the New Deal was imposed, the economy started to recover, until it fell into a recession again in 1937 when FDR tried to balance the budget.

After that came WW2, as government spending soared, the crisis was left behind.\

And in the 1940's when large numbers of US troops came home, and when the government slashed the bugdet by 2/3rds, and all of the factories were no longer required to produce weapons for the government.

What happened again?

No individual would have the audacity to say that the 5,000 dollars a month they spend per month is covered by the 3000 dollars per month of future income, but i don't want to insult your intelligence by implying you don't already know that.

I'm saying that the US government can collect enough taxes to pay its debt.

It's gotten to the point where massive tax increases and massive budget cuts are the only thing that is going to save the sinking ship. The interests that back every government expenditure are imbedded too deeply for there to be any hope of repaying the debt. Especially when you have politicians like Obama that are so capricious with their promises that they can get away with promising to cut the deficit in half and, in the course of one year, make a humiliating j curve out of the federal debt line.

That's quite an imperfect view of the General Theory.

Firstly, Keynes does not use such characterization of economic agents. He does say that some are good, bad, nor believes the superiority of one agent over another.

As any scientist, he studies a phenomenon and tries to explain it. It had been long ago observed (by Marx) that capitalist economies face regular downturns.

All economies face down turns. Communist economies face downturns. Agrarian economies face downturns.

The commercial boom and bust cycle as is known today first began probably in commercial Europe in places where large banks first started to appear. But it's not the voluntarily, individualistic, element to the economy that makes the boom and bust, in the case of europe it was fractional reserve banking.

However, these crisis were getting stronger and stronger (also, noted by the first time by Marx), and some did not fix themselves shortly. Before the Great Depression, Britain had experienced a long period of high unemployment, which gave Keynes the upper-hand in the discussion of the Great Depression. And that's basically the core of Keynesian theory: recessions can be managed, through monetary, trade, and fiscal policy.

The State acknowledged the existence of these tools, and has been using them for the last 70 years, with varying degrees of success.

Such as Japan and The US in the Seventies.

I'm not calling you a Keynesian, but your general dislike of investors

¿?
I never said I disliked investors.

"Relying on institutional investors to self-regulate is the economic equivalent of letting children decide their own diets"

Disliked may have been a bad term. But i get the feeling you think that the government is more cautious with the investors money than the investor is with his own money.

_____________

I'm going to say, though, that you won this debate. Until i can actually study the great depression the same way I dealt with foreign policy. I'm not going to pretend i know enough 'herstory' to talk about the great depression and potentially say something that's outright fallacious.