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Ask HN: What are you reading to make sense of the economy?

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Re: Ask HN: What are you reading to make sense of the economy?

#71

Post by RobertoG »

postingawayonhn wrote: post #41
oDot wrote: post #19

The only school that has any explanation for this is the Austrian School of Economics. Their theory of the business cycle is the reason they successfully predict every crisis to the tee (except for timing, no one can do that), while other economists are just blown away in surprise that it even happened. Mises and Hayek wrote big and hard to read books about it, but two that explain this to the layman are "Meltdown" b…

I don't think the Austrian School explains what's happened so far, but may help explain some of what is to come. Everything we've seen so far is simply the result of people not being able to operate their businesses. What we will soon see is businesses closing down and probably mass default on debt. I do believe that the Keynesian economics that has been practiced for the last few decades has left the global economy…

Keynesian economics has been practiced for the last few decades? Where? They don't call it the neoliberal period for nothing.

If you are talking about the QE programs, that's what Keynesian economics would call "pushing a string". Keynesian would be fiscal policies, not monetary policies.

Re: Ask HN: What are you reading to make sense of the economy?

#72

Post by DrNuke »

You may want to have a look at five world-leading, freely available general references (from World Bank, International Monetary Fund, Merryll Lynch, United Nations and Deutsche Bank... look for their latest updates following this crisis), which I used as an intro for my recent booklet about Economy https://www.tenproblems.com/2020/02/24/ten-problems-for-econ...

Re: Ask HN: What are you reading to make sense of the economy?

#74

Post by state_less »

oDot wrote: post #53
sametmax wrote: post #49

Earlier quoted context omitted.

I predict it will rain after a sunny day. Some day.

Then you should buy umbrellas, and not listen to people saying it'll be sunny forever.

> The only school that has any explanation for this is the Austrian School of Economics.

I doubt it’s the only ‘school’ that has an explanation. That there are cycles in the economy isn’t a very strong statement. Nor does it seem to apply here because this is a different cause than one underpinning a typical business cycle.

Until this virus is wrestled to the ground somehow (e.g. distancing, sterilization, vaccine, herd immunity, etc...), we’ll continue to see mitigating effects which distort the picture of normalcy pre-2020.

Re: Ask HN: What are you reading to make sense of the economy?

#75

Post by sergiosgc »

BaronSamedi wrote: post #68
DyslexicAtheist wrote: post #15

Nassim N. Taleb, author of BlackSwan books. His thinking about risk/probability is timeless. Frequently publishes links to his papers and debunks the BS-peddlers on his twitter: https://twitter.com/nntaleb

I liked Taleb's "The Black Swan" but find his Twitter persona grating. He displays an attitude of, "anyone who doesn't agree with me is dumb". I think the opposite is needed now. Complex and difficult issues are better approached with humility, and a frank and open discussion of uncertainty.

I don't mind arrogance on public personas[^] who are very good at what they do. Think Steve Jobs arrogance. Think José Mourinho "I'm the special one" in 2004. I read it as putting your (reputational) neck on the line. "I'm so sure of this assertion that I'm risking my reputation here.". Taleb is one such brilliant mind.

The downside to arrogance is that it will tank your reputation if you fail. This may be too early in History, and too politically charged to use as an example, but think Trump.

[^] on personal interactions, though, I find arrogance a repellent trait.

Re: Ask HN: What are you reading to make sense of the economy?

#76

Post by mempko »

This website from Ray Dalio is excellent. https://economicprinciples.org/

Read Debt the first 5000 years from David Graeber.

Read Money in the Modern Economy from the Bank of England. https://www.google.com/url?q=https://www.bankofengland.co.uk...

Why these? You have to understand money and credit. Economics ignores money and credit which would be like physics ignoring atoms and gravity.

Re: Ask HN: What are you reading to make sense of the economy?

#77

Post by RobertoG »

vinceguidry wrote: post #58

Wikipedia. Just yesterday I was explaining my layman's understanding of econ, namely that money itself is zero-sum, so the prices of goods and services float on the free market according to how much people are willing to pay for them. Central banks inject money into the economy, inflating the economy, reducing costs across the board. This acts as a wealth transfer from wealth holders to wealth producers, by that I me…

>>"This coupled with fractional reserve banking means that the banks can make a whole lot more loans, flooding the system with liquidity so that money can start moving again."

That's not how it works.

First, never mind how much money banks can lend, if there is nobody asking for credit. You can't create demand for credit by QE.

Second, private banks are not limited in their capacity for creating credit by the quantity of reserves available. If central banks are going to keep their interest rate target they have to facilitate any demand of reserves by private banks.

It's impossible for a Central Bank to control the quantity of money and the interest rate, they have to choose one, and they choose the interest rate.

As I said in another post, I was totally confused about how it works until I started to read the Modern Money Theory version of all this.

Here, explained by the Bank of England (pdf):

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Re: Ask HN: What are you reading to make sense of the economy?

#78

Post by cynusx »

I wouldn't look at economic theory to predict what will happen as economists haven't studied economies subject to pandemics, but you can look at the reality on the ground

1/ consumer confidence is extremely low as people are afraid of the virus and afraid of losing their jobs

2/ businesses have seen sudden and complete revenue destruction with revenue going down from 50% to 0% of pre-crisis; however their obligations (salaries, servicing debt, paying suppliers) obviously are still there. The natural instinct is to pause projects, new hiring, layoff people, stop buying things, postpone payments to suppliers and be more aggressive in collecting invoices.

This becomes a self-reinforcing cycle purging non-essential businesses or non-competitive businesses at a very high rate.

This will accelerate until normal people are no longer afraid to go out and then the supply chains will restart with the businesses managed to remain alive.

The best policy response would be to freeze the capitalist system altogether and allow any liability due in the future to be postponed by 3 months when entities can prove significant revenue shortfalls and implement an aggressive government-backed temporary unemployment system for those businesses as well.

To the extent that people haven't lost their job yet, it would fix the impulse of business owners to do this very aggressively in the necessity to balance inbound and outbound cash and post-crisis these businesses would have similar balance sheets as pre-crisis so life can resume quickly.

For normal people nothing would change much to the current situation (stay at home, temporary unemployment, being afraid).

The other good policy response I have seen is to force banks to give businesses a corona-credit and to guarantee those loans. It's less good because it does increase the debt-load of a company which alters their balance sheets and would have to be paid off post-crisis.

Re: Ask HN: What are you reading to make sense of the economy?

#80

Post by RobertoG »

postingawayonhn wrote: post #47
brainpool wrote: post #27

Definitely Keynes. Much of the fundamentals hasn’t made much sense earlier, but it does now. https://en.m.wikipedia.org/wiki/John_Maynard_Keynes

I'd argue the Keynesian response to the last crisis is what has left us so overleveraged and poorly prepared for this one.

What Keynesian response? A Keynesian response would be a fiscal response to a fall in aggregate demand by governments, not a monetary one by central banks.
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