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Sounds like we need a new thread.

Keynesian economics is a bit like a diet plan: it's not that it doesn't work, it's just that nobody follows it.

Governments understand the "borrow and spend during recessions" part, but they don't understand the "tax and save during growth periods" part.

Keynesian economics is a bit like a diet plan: it's not that it doesn't work, it's just that nobody follows it.

Governments understand the "borrow and spend during recessions" part, but they don't understand the "tax and save during growth periods" part.

What makes you think spending during a recession is a good thing? Although I don't want to delve too deep into this venue, as it is not in line with the OP, I feel the need to point out that the viewpoint of government spending during recessions is being challenged. One could cite the economic recessions of 1921 and 1929 as examples, as well as our current depression as examples of how government spending during these times is not good.

The Austrian school argues that depressions, when left alone, correct themselves very quickly once bad assets and debt have been liquidated and resources are freed to be applied elsewhere.

I actually don't think the Gold Standard is a terrible idea, in theory.

I just don't see how we could implement it without destroying the global economy. I'm sure Ron Paul would say "feth 'em" which I can also appreciate, but I'm not ready to jump off that cliff just yet.

Off-topic digression/possible trolling redacted.

What makes you think spending during a recession is a good thing?

US history between 1929 and 1939, unless you're a crazy revisionist or a Fox News employee.

I actually don't think the Gold Standard is a terrible idea, in theory.

I just don't see how we could implement it without destroying the global economy. I'm sure Ron Paul would say "feth 'em" which I can also appreciate, but I'm not ready to jump off that cliff just yet.

Switching back to the gold standard would be a painful process, no argument on that. If I recall correctly there is only around 150,000 tons of gold in circulation in the entire world, the stated "value" of this gold is less than the money in the U.S. alone (but you have to remember that an ice cream cone that today costs 3 bucks used to cost 15 cents or less one hundred years ago).

However, choosing to stay with the system we have today has proven and will prove to continue to be disasterous. Governments can and also will be highly susceptible to the ideas of deficit spending and intentional inflation policies. A gold standard effectively wards off these sorts of policies while insuring a stable value of all currency.

I'm not an economist, so I really don't delve too deeply into it. Usually spending during a recession is at least partly a way of pacifying the people. Economics or no, a general revolt is never a good thing.

Monster Rain wrote:I actually don't think the Gold Standard is a terrible idea, in theory.

I just don't see how we could implement it without destroying the global economy. I'm sure Ron Paul would say "feth 'em" which I can also appreciate, but I'm not ready to jump off that cliff just yet.

Well Ron Paul thinks the US government was involved in 9/11 so F him to, but thats justa side point I like to bring up when I interact Ron Paul supporters. Its when they say "yea he's right" I get extra careful...

Frazzled wrote:

Monster Rain wrote:I actually don't think the Gold Standard is a terrible idea, in theory.

I just don't see how we could implement it without destroying the global economy. I'm sure Ron Paul would say "feth 'em" which I can also appreciate, but I'm not ready to jump off that cliff just yet.

Well Ron Paul thinks the US government was involved in 9/11 so F him to, but thats justa side point I like to bring up when I interact Ron Paul supporters. Its when they say "yea he's right" I get extra careful...

That would be one of the incidents I alluded to earlier, when I have to shake my head and say "He was doing so well up to that point."


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Manstein wrote:

I actually don't think the Gold Standard is a terrible idea, in theory.

I just don't see how we could implement it without destroying the global economy. I'm sure Ron Paul would say "feth 'em" which I can also appreciate, but I'm not ready to jump off that cliff just yet.

Switching back to the gold standard would be a painful process, no argument on that. If I recall correctly there is only around 150,000 tons of gold in circulation in the entire world, the stated "value" of this gold is less than the money in the U.S. alone (but you have to remember that an ice cream cone that today costs 3 bucks used to cost 15 cents or less one hundred years ago).

However, choosing to stay with the system we have today has proven and will prove to continue to be disasterous. Governments can and also will be highly susceptible to the ideas of deficit spending and intentional inflation policies. A gold standard effectively wards off these sorts of policies while insuring a stable value of all currency.

Yeah, I mean I totally agree with that in my extremely limited knowledge on the subject.

US history between 1929 and 1939, unless you're a crazy revisionist or a Fox News employee.

Last time I opened a history book I saw the government spend a great deal of money for 10 years and it did no good.

WWII pulled us out of the depression by acting as an artificial agent in which to create demand. When you enlist millions in the armed forces and send resources off to be destroyed then the economy is going to change. It was not until Eisenhower's massive army reductions and a return to "relatively less" government intervention in the economy that we saw the boom of the post war.





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Frazzled said

Well Ron Paul thinks the US government was involved in 9/11 so F him to, but thats justa side point I like to bring up when I interact Ron Paul supporters. Its when they say "yea he's right" I get extra careful...

As someone who is usually a fan of your posts, that last comment was none sense. Here is Paul at the last election cycles presidential debate denying that claim in a very straight forward manner. To speculate that he secretly still harbors that belief is about as silly as believing 9/11 was an inside job and just as conspiritorial.

http://www.youtube.com/watch?v=hGyhlNY0y1k&feature=related

Manstein wrote:

US history between 1929 and 1939, unless you're a crazy revisionist or a Fox News employee.

Last time I opened a history book I saw the government spend a great deal of money for 10 years and it did no good.

WWII pulled us out of the depression by acting as an artificial agent in which to create demand. When you enlist millions in the armed forces and send resources off to be destroyed then the economy is going to change. It was not until Eisenhower's massive army reductions and a return to "relatively less" government intervention in the economy that we saw the boom of the post war.

Not to nit-pick, but the hoover administration did about nothing for three and a half years first. The New Deal didn't kick in until mid 1932. Unless Hoover was secretley spending more money than I think, the economy didn't exactly rebound too well under laissez faire.

Not to nit-pick, but the hoover administration did about nothing for three and a half years first. The New Deal didn't kick in until mid 1932. Unless Hoover was secretley spending more money than I think, the economy didn't exactly rebound too well under laissez faire.

You actually just hit the nail on the head Polonius, but in a different way than you might expect. Hoover was actually heavily involved at first, calling many business leaders in for private meetings and insisting that they not cut wages or let go of workers. Pressure from the Hoover Administration prevented large businesses from expunging bad assets in the form of labor on the onset, meaning that the businesses held on to those assets hoping to ride it out, which, as a result of their not expunging them, they did not. This is what let to the eventual massive lay offs and job losses that turned the recession of 29 into the Great Depression.

Naturally, politics being politics, FDR picked up on this and ran saying Hoover did not do enough. Since FDR won the election and Hoover lost, the tale of the victor is told here and the myth of Hoover being a none interventionalist in economic affairs was solidified.

To quote Lee Ohanian, Professor of Economics at UCLA, "[Hoover] adopted pro-labor policies after the 1929 stock market crash that accounted for close to two-thirds of the drop in the nation's gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression."

I'm not trying to be contrary, but I'm having a hard time believing that business leaders in 1929 held onto workers at the request of the president.

I'm not saying none did, but that seems far-fetched to me.

I can understand your skepticism on the topic Polonius, and I would expect nothing else of someone genuinely trying to understand a new theory. Here is a link to one of Lee Ohania's, a well known Professor of Economics at UCLA, lectures on the subject. He can explain it far better than I.

If you want the meet, skip to the 10 minute mark and wait for it, he starts up pretty quick on the worker topic on which I am speaking.

http://www.youtube.com/watch?v=d_YMR1Gk2JU

So if only we had done nothing?

You'll need more than one economist to support that argument boyo.

Manstein wrote:Switching back to the gold standard would be a painful process, no argument on that. If I recall correctly there is only around 150,000 tons of gold in circulation in the entire world, the stated "value" of this gold is less than the money in the U.S. alone (but you have to remember that an ice cream cone that today costs 3 bucks used to cost 15 cents or less one hundred years ago).

The problem is, if you set $1 equal to X amount of gold, then how do you create more wealth? Any additional value that is created must be by devaluing the existing wealth (or by creating more gold).

For example:

If everything in the world is 2 sheep and 2 oz of gold, then 1 sheep is worth 1 oz of gold. If those sheep have 4 lambs, then by the next generation we have 4 sheep and 2 oz of gold. Now a sheep is only worth 1/2 oz of gold. Under a fiat currency, the value of currency can be inflated to match the change in total wealth, simply add $2 to the global net worth and now sheep continue to be worth $1.

Looking at it from the perspective of the capitalist: by holding onto his gold in the first scenario he doubles the value of his money by simply holding onto it. In the second scenario, the value of the capitalist's money is the same (or slightly decreased due to the decrease in demand for sheep). However, from the producer's perspective a fiat currency allows him to double his wealth while applying the gold standard simply means he has the same amount of wealth.

If the goal of the government is to maximize wealth production, the gold standard is a bad idea, because it incentivizes hoarding of capital and fails to incentivize production.

I'll ehck it when I'm home later tonight (if my internet allows me to stream...)

I'm seriously doubting two aspects of the theory:
1) that businesses would retain workers solely as a favor to the president
2) that retaining those workers was the precipitating factor for expanded depression

The latter I suppsoe could be enough, although that kind of disproportionate response seems dramatic. The former just doesn't seem likely given the business climate of the times.

He is a lecture by Professor Thomas Woods, he isn't an economist but rather a historian. I realized that for some Ohanian's intense economic theory lecture might lead those not familiar with all the terms a bit in the dark, since history reads a lot more like a narrative, perhaps a historian will be easier to understand.

http://www.youtube.com/watch?v=vW5yvuyhVyI&feature=relmfu

So if only we had done nothing?

You'll need more than one economist to support that argument boyo.

Do a quick search on the recession of 1921, the government did nothing and the markets corrected everything in a year and a half. Sitting around and doing nothing is hard, we all want to get up and try to fix things to make it better. However, there are some things in life that you just need to sit back and leave alone if you want it to correct itself.

As for requiring another economist, you can ask any Austrian economist, not just Ohanian, what they think on the Great Depression and they will tell you the same thing. Unfortunately, the predominant economic philosophy at the moment is Keynesianism, meaning the Austrians tend to go unheard and unrecognized. Thankfully, these Austrians are getting more and more well known as our recession begins to become more of a depression.

O... and if you want another name, even though I think he is an ass hole, Peter Schiff agrees and he predicted the current economic failure in 2003 on live cable television.


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I'll ehck it when I'm home later tonight (if my internet allows me to stream...)

I'm seriously doubting two aspects of the theory:
1) that businesses would retain workers solely as a favor to the president
2) that retaining those workers was the precipitating factor for expanded depression

The latter I suppsoe could be enough, although that kind of disproportionate response seems dramatic. The former just doesn't seem likely given the business climate of the times.

Perhaps my earlier comment was too ham fisted, to be more precise... The Hoover Administration pressured the private sector and passed regulations putting severe price and wage controls on various businesses and companies in spite of the fact that there were many workers of the same skill and experience willing to work for an average of 30% less than current market wages. Check out the lectures and that will be explained in more detail for you.

Because I had to go there:

If everything in the world is 2 sheep and 2 oz of gold, then 1 sheep is worth 1 oz of gold. If those sheep have 4 lambs, then by the next generation we have 4 sheep and 2 oz of gold. Now a sheep is only worth 1/2 oz of gold. Under a fiat currency, the value of currency can be inflated to match the change in total wealth, simply add $2 to the global net worth and now sheep continue to be worth $1.

Looking at it from the perspective of the capitalist: by holding onto his gold in the first scenario he doubles the value of his money by simply holding onto it. In the second scenario, the value of the capitalist's money is the same (or slightly decreased due to the decrease in demand for sheep). However, from the producer's perspective a fiat currency allows him to double his wealth while applying the gold standard simply means he has the same amount of wealth.

The premise of your comparison is false. Currency is not meant to be like sheep, ever growing and constantly reproducing, rather... wealth is supposed to change form in the medium of said goods. Increasing the amount of money in the money supply only gives the illusion of there being more wealth but inflation always comes afterwards and the products you once paid X for, now cost not Y but rather Z.

Your point driving towards the retention of wealth is good, but too all incomposing. Your thesis is thata gold currency stymies investment and prevents growth because investors see greater profits in retaining their money. This would not take place is no one invested their money and the fact that saving can be profitable means that investors will make sure they put there money into places where growth is sure to be stable and worth while, not risky (as out last housing bubble).


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@ Frazzled

That video is hilarious and I love it, it explains how the Austrian school is what needs the attention and how Keynesianism is flawed. But it does so in a rap! YEAH!

Its one of my boy's favorites. Yea he's weird.

@Frazzeled

The sequel to your video: http://www.youtube.com/watch?v=d0nERTFo-Sk&feature=relmfu


(I wish I knew how to upload the video! )

Manstein wrote:The premise of your comparison is false. Currency is not meant to be like sheep, ever growing and constantly reproducing, rather... wealth is supposed to change form in the medium of said goods.

What premise is false? I simply presented a factual situation and the results of both.

In my opinion (and I think this would be shared by a lot of people) currency is meant to be a reflection of the total wealth of a society.

Manstein wrote:Increasing the amount of money in the money supply only gives the illusion of there being more wealth but inflation always comes afterwards and the products you once paid X for, now cost not Y but rather Z.

As more wealth is produced, society becomes wealthier. The amount of currency should grow to reflect this. Yes, an ice cream cone today that costs $1 would have only cost 35 cents 40 years ago (simply by way of example), but what is the relative cost of $1 today vs. 35 cents 40 years ago in terms of the cost of labor? The amount a laborer has to work to obtain an ice cream cone has decreased.

Manstein wrote:Your point driving towards the retention of wealth is good, but too all incomposing. Your thesis is thata gold currency stymies investment and prevents growth because investors see greater profits in retaining their money. This would not take place is no one invested their money and the fact that saving can be profitable means that investors will make sure they put there money into places where growth is sure to be stable and worth while, not risky (as out last housing bubble).

Why would someone who has gold in hand ever want to invest? The only way that more "profits" are earned is either by taking them from someone else or by gold production. The growth in wealth can never exceed gold production.

In a fiat system, producing wealth grows the economy, and the wealthy earn profits not by taking from others, but by producing more wealth.

As an aside, the gold standard forms the building blocks for class resentment and socialism/communism. As long as there's a fixed pot of wealth, there is a desire to take it from the "capitalists" who hold the gold and distribute it fairly.

Manstein wrote:@Frazzeled

The sequel to your video: http://www.youtube.com/watch?v=d0nERTFo-Sk&feature=relmfu


(I wish I knew how to upload the video! )

click SHARE and then EMBED



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Manstein wrote:

US history between 1929 and 1939, unless you're a crazy revisionist or a Fox News employee.

Last time I opened a history book I saw the government spend a great deal of money for 10 years and it did no good.

WWII pulled us out of the depression by acting as an artificial agent in which to create demand. When you enlist millions in the armed forces and send resources off to be destroyed then the economy is going to change. It was not until Eisenhower's massive army reductions and a return to "relatively less" government intervention in the economy that we saw the boom of the post war.





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Frazzled said

Well Ron Paul thinks the US government was involved in 9/11 so F him to, but thats justa side point I like to bring up when I interact Ron Paul supporters. Its when they say "yea he's right" I get extra careful...

As someone who is usually a fan of your posts, that last comment was none sense. Here is Paul at the last election cycles presidential debate denying that claim in a very straight forward manner. To speculate that he secretly still harbors that belief is about as silly as believing 9/11 was an inside job and just as conspiritorial.

http://www.youtube.com/watch?v=hGyhlNY0y1k&feature=related

Well as I've seen him discuss this allegation multiple times that does it for me. if you believe something that crazy for years you're cookoo for coco puffs in my book.

{youtube}http://www.youtube.com/watch?v=hGyhlNY0y1k{/youtube}

Ah.

One less thing to disagree with him over, then.

In a fiat system, producing wealth grows the economy, and the wealthy earn profits not by taking from others, but by producing more wealth.

As an aside, the gold standard forms the building blocks for class resentment and socialism/communism. As long as there's a fixed pot of wealth, there is a desire to take it from the "capitalists" who hold the gold and distribute it fairly.

That statement sounds great, and if it were possible even I might give a second thought to the usage of fiat currency. Unfortunately, once paper money is unhooked from the gold standard, or a silver standard, you invariably get a snow ball effect on the economy. At first the snowball is small and prices only rise slowly, however, eventually prices begin to rise at inordinate levels and hyperinflation follows. Every fiat currency in the history of mankind, save the U.S. dollar, has experiences massive hyperinflation at some point in its life span. For a good modern day example one need only look to Germany in the 1920s, where children build castles out of 100 Deustch Mark stacks of bills.

The only way to regulate this growth is.... well... an illusion. Advocates of fiat money promise exactly what you have stated, more wealth, and then claim that they can control the negative side effects through central banking, i.e. the Federal Reserve. In the words of Herman Cain (although I don't like him, I do love that I am about to use a quote from an ex- State Fed Chairman) "How's that working for you?"

Central banking through a fiat currency system leads to boom and bust cycles that cause more harm than happiness. So far we have been lucky in that our busts have been minor, up until 2009 and the ongoing years. Austrian economists, the economists who have predicted every bust that has taken place after 1945, predict that this "recession" is only going to get a lot worse, especially once we hit a dollar crisis.

In the end, fiat money sounds great, and can, for a short amount of time, provide greater wealth. Unfortunately, the wealth does not last and eventually just gets redistributed to those at the highest end of the monetary spectrum. Fiat currencies make the rich richer and make the poor suffer the hardest via inflation and loss of value. That is where your class warfarists should really be looking, one need only look back to the bailouts of a few years ago and see that the top 1% benefits more from invisible manipulation of fiat money than from a stable gold standard.

Manstein wrote:
The Austrian school argues that depressions, when left alone, correct themselves very quickly once bad assets and debt have been liquidated and resources are freed to be applied elsewhere.

Anything you have to say after that citation should be mocked, aggressively.

I mean seriously bro, the argument you have given voice to here is essentially "after the recesion is over, the recession will be over" its tautological crap which you should be ashamed of.


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Manstein wrote:
Central banking through a fiat currency system leads to boom and bust cycles that cause more harm than happiness.

Yeah, totally....

I could see the merits of such an argument if your contention is that the harm done to people outside the system relevant to the bank is important, as the purpose of central banks is the use of authority over value for the purpose of amalgamating wealth in a given set of hands. Unfortunately that isn't the point you're trying to make.

Manstein wrote:
Austrian economists, the economists who have predicted every bust that has taken place after 1945, predict that this "recession" is only going to get a lot worse, especially once we hit a dollar crisis.

They also predicted several which never came to pass. When all you pronounce is doom, you will eventually be correct.

dogma wrote

Anything you have to say after that citation should be mocked, aggressively.

I mean seriously bro, the argument you have given voice to here is essentially "after the recesion is over, the recession will be over" its tautological crap which you should be ashamed of.

Your user name fits you perfectly.

Well as I've seen him discuss this allegation multiple times that does it for me. if you believe something that crazy for years you're cookoo for coco puffs in my book.

I like to think I follow things very closely, and Paul as never written nor said that he believed 9/11 was an inside job or not committed by terrorists.

In the past Paul has left the question open as stated that he was unsure and would like more information on the subject. Although it might have seemed obvious to many, it is not a sign of insanity to question things. Although the comparison may be strong, I am sure Catholics in the dark ages thought the same thing of folks like Galileo and Copernicus.

I am not saying that 9/11 truthers are right, I personally don't agree with them, but I don't think someone questioning it for a short period of time is wrong. Paul was unsure, he looked at the facts closely and changed his opinion of "not sure" to "sure that terrorists did it."



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dogma wrote:

Manstein wrote:
Central banking through a fiat currency system leads to boom and bust cycles that cause more harm than happiness.

Yeah, totally....

I could see the merits of such an argument if your contention is that the harm done to people outside the system relevant to the bank is important, as the purpose of central banks is the use of authority over value for the purpose of amalgamating wealth in a given set of hands. Unfortunately that isn't the point you're trying to make.

Although I didn't plan on answering you, I actually did say what you just said, in more or less words.

n the end, fiat money sounds great, and can, for a short amount of time, provide greater wealth. Unfortunately, the wealth does not last and eventually just gets redistributed to those at the highest end of the monetary spectrum. Fiat currencies make the rich richer and make the poor suffer the hardest via inflation and loss of value. That is where your class warfarists should really be looking, one need only look back to the bailouts of a few years ago and see that the top 1% benefits more from invisible manipulation of fiat money than from a stable gold standard.

Manstein wrote:Central banking through a fiat currency system leads to boom and bust cycles that cause more harm than happiness. So far we have been lucky in that our busts have been minor, up until 2009 and the ongoing years. Austrian economists, the economists who have predicted every bust that has taken place after 1945, predict that this "recession" is only going to get a lot worse, especially once we hit a dollar crisis.

Under a gold standard you still need a central bank if you want anything other than gold coins changing hands. Even then, there must be some sort of regulation to establish and monitor gold weights. The failure of the US and French central banks to regulate the value of gold in the '20s is what led to the great depression, and has caused a lot of major swings throughout history.

Since you don't provide any references or jumping off points for your argument, I'm not sure how to respond to the rest of it.