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Fed Ends Zero-Rate Era

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Re: Fed Ends Zero-Rate Era

#331

Post by bildung »

canicode wrote: post #322
crdoconnor wrote: post #244

Earlier quoted context omitted.

I'm not at all concerned about economists who are "for" or "against" the minimum wage. They can hold whatever opinions they want if they don't lie. It's the economists who poorly design studies with the intent of demonstrating that it either causes prices to rise uncontrollably (which it doesn't), causes unemployment to rise (which it also doesn't) and who pointedly never, ever, ever look at the effect it has on prof…

Please read this: https://www.reddit.com/r/explainlikeimfive/comments/3ulzdy/e... Raising the minimum wage WILL increase unemployment. That's Economics 101. Companies are going to find ways to fire people, or give them fewer hours. Raising the minimum wage to something like $15 would be ludicrous.

> Raising the minimum wage WILL increase unemployment.

Reality disagrees :) Germany introduced minimum wage recently and the opposite of your prediction happened.

The argument didn't match reality because it completely ignores the growth of purchasing power that is a consequence of higer wages.

Re: Fed Ends Zero-Rate Era

#332

Post by toomuchtodo »

morgante wrote: post #321
toomuchtodo wrote: post #187

Earlier quoted context omitted.

> The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those. Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why?

> Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why? Because social security is billed as a retirement scheme, not a wealth transfer scheme. The idea being that you get back out approximately what you get in. Since benefits are capped, payments necessarily are. If you want to change social security into an explicit wealth transfer scheme, expect heavy resistance.

> Since benefits are capped, payments necessarily are. If you want to change social security into an explicit wealth transfer scheme, expect heavy resistance.

You eat an elephant one bite at a time.

Re: Fed Ends Zero-Rate Era

#333

Post by toomuchtodo »

canicode wrote: post #324
pitt1980 wrote: post #260

Earlier quoted context omitted.

"agents of bourgeoisie capitalists" I don't wonder about the sincerity of most economists I do wonder if there are selection pressures to becoming an economist that prevent a diversity of viewpoints on certain issues sometimes those neatly line up with the bourgeoisie capitalists (who just coincidentally disproportionately have their names on university building and have levers on which university departments get gen…

Would you like a socialist society? Do you want a welfare state? I don't. Why shouldn't some people be able to afford luxuries like names on buildings?

> Would you like a socialist society? Do you want a welfare state? I don't.

I do. And I spend time and money on the political process.

> Why shouldn't some people be able to afford luxuries like names on buildings?

Let's talk about everyone being fed, clothed, and sheltered before you bring your straw man out.

Re: Fed Ends Zero-Rate Era

#334

Post by SapphireSun »

brc wrote: post #256
SapphireSun wrote: post #241

Earlier quoted context omitted.

Err... I guess I used the word want loosely. I meant demand. Savings are just postponed consumption, but if the consumptions of multiple people never align (you could save until you're dead) the aggregate demand will never rise to a high level.

Well, that's still not true. Savings are put to use by investing - either by the saver or someone else on their behalf (capital markets/banks). The savings further production by being used by someone else. Keynes had to kill the idea that production is the foundation of growth in an economy. He did this by implanting the idea that production is irrelevant, all you needed as spending (the fantasy of aggregate demand).…

Hmm, I think you're mostly right, but here's the thing. If you put consumer money in the bank, then it goes to investment in additional production. Loans to businesses allow them to staff up and/or purchase capital equipment. However, if in the aggregate, the base consumer purchasers don't have any cash, they won't be buying things from those businesses.

What you are saying sounds so easy, but if it were, there wouldn't be recessions or liquidity traps. You're right that production is key, but if the monetary system becomes friction in between producers and consumers, then problems can arise even if production is okay. I don't really see a contradiction here. Savings are the foundation of future wealth, but if nobody spends any money, businesses crumble, and capacity is lost. When people decide to spend again, it takes time for the economy to recover.

Re: Fed Ends Zero-Rate Era

#335

Post by Yrlec »

theseatoms wrote: post #179
ap22213 wrote: post #172

Earlier quoted context omitted.

So, the alternative is what? Allow wages to move toward zero? Then what?

A global minimum income. Or the strictly-superior-to-a-minimum-wage Earned Income Tax Credit [1]. [1] https://en.wikipedia.org/wiki/Earned_income_tax_credit

http://www.wsj.com/articles/better-than-raising-the-minimum-...

Re: Fed Ends Zero-Rate Era

#336

Post by lmm »

vezzy-fnord wrote: post #86
toomuchtodo wrote: post #80

Earlier quoted context omitted.

I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up. Japan's been running structural deficits for decades, and still has a very high quality of life. > but in reality politics and the economy don't exist in frictionless vacuums and there are political costs to pork barreling, logrolling, unsound investments and so forth. As basic minimum income solves this…

I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up. Given that the AI community's prediction making skills have been just slightly better than those of Nostradamus, that's a very tough gambit to rely on. Japan's been running structural deficits for decades, and still has a very high quality of life. Except for the aftermath of the whole Lost Decade thing…

> Though, if you're idealistic enough to think the UBI is a prospect soon realizable, I wonder why you're advocating minimum wage increases over say, stronger collective bargaining?

Why not both? Seriously I am very much in favour of e.g. working time restrictions, but "union" is a dirty word in the US (indeed you carefully avoided saying it), so I don't think advocating stronger collective bargaining rights would help me achieve my policy goals.

Re: Fed Ends Zero-Rate Era

#337

Post by lmm »

eru wrote: post #217
vezzy-fnord wrote: post #214

Earlier quoted context omitted.

Competition drives prices down, but chances are people with limited options to shop around and who disproportionately head towards mass retailers already , by example, live in areas with im perfect competition and in the worst case, food deserts. As such, a minimum wage would seem to negate itself again.

> Competition drives prices down, [...] Tell that to Google and Facebook bidding on programmers.. Or people trying to buy real estate in London.

London's planning process is dysfunctional, and the housing supply is nowhere near keeping up with demand.

Re: Fed Ends Zero-Rate Era

#338

Post by lmm »

brc wrote: post #318
millstone wrote: post #299

Earlier quoted context omitted.

You wrote "The person who produces unwanted goods and services must...switch production to what is desired," which presupposes that there is something else desired, i.e. there is no general glut. For example, we Americans demand less oil today than we did 10 years ago. This contributes to the oil glut, which has turned many drill sites into malinvestments and caused layoffs in the petroleum industry. How can you say…

Unpacking that slightly. First, an oil glut is not a general glut, so it's possible that the demand for oil has shifted elsewhere. I don't agree that an ad campaign for national gas guzzler travel would increase oil prices, because it's very unlikely that such a campaign would work, and even if it did, it would be a poor choice of resource spend. Going back to a general glut - and I hate the term - of course it is po…

> Such a scenario is generally best resolved by solving the cause of the shock and doing everything to let the market clear. Most of the time this will be temporary and conditions will resolve, if not at the speed at which makes everything happy.

Maybe waiting would work, but that's no reason not to intervene if we think that intervention can bring us faster growth (even if this will only be temporarily faster growth until we "catch up" to currently unused production capacity). If consumption stimulus will help recovery (and I think it will, on Keynesian grounds) we should do it.

Re: Fed Ends Zero-Rate Era

#339

Post by RobertoG »

brc wrote: post #114
dsr_ wrote: post #50

Earlier quoted context omitted.

If you want to stimulate aggregate demand at the consumer level, you need more people to have good jobs, so they can make money, so they can spend money. This would represent a reversal of the trend since 1970 towards greater income inequality. It is not clear to me that anyone is doing anything about that (except, of course, in the negative sense.)

Consumer demand is meaningless. Trying to push it is like trying to push a string. Demand is an artefact of production. Unless your economy is producing, you won't increase quality of life and wealth for all citizens. This point is obvious, but gets completely lost in all the frenzy around 'stimulating demand'. To buy something, first you have to produce something worthy of exchange. Everyone has to start from this p…

Why would you produce something for what there is not demand? Is not this the first lesson for start ups? searching for a market-product fit?

Do you agree that the goal of a business is profit?

Ergo, is the prediction of profits what create production. This is the core of the capitalist system, isn't it?

If a business don't see profit in its future, the rational thing to do is decrease production and, more important, stop new investments. That means lay offs, no new hires, etc..

Less people with jobs, less people with money, less demand, less future estimation of profits. Feedback loop.

Then come the creative destruction, that is supposedly a good thing. People is more desperate, accept worse conditions, business not 'efficient' enough close, this create less competence in the market and people ready to work for less. The survivors can accumulate more claims in the economy, what means concentration of capital in less hands. Rise and repeat.

Re: Fed Ends Zero-Rate Era

#340

Post by lmm »

toomuchtodo wrote: post #185
randomname2 wrote: post #183

Analysis from TD on how banks (Wells Fargo, US Bankcorp, JPMorgan, M&T, PNC, Citi) rushed to hike the prime rate to 3.50%, and forgot to increase the deposit rate: As CNBC reported [1], "a change in the federal funds rate will have no impact on the interest rates on existing fixed-rate mortgage and other fixed-rate consumer loans, a Wells Fargo representative told CNBC. Existing home equity lines of credit, credit ca…

> Existing home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will be impacted if the prime rate rises, the person said. > "We won't automatically change deposit rates because they aren't tied directly to the prime," a JPMorgan Chase spokesperson told CNBC. "We'll continue to monitor the market to make sure we stay competitive." Heads I win, tails yo…

To be fair mortgage rates are often explicitly, contractually tied to prime rates, whereas savings rates generally aren't.
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