[deleted]
How the Economic Machine Works (2014)
11–20 of 45 posts
Re: How the Economic Machine Works (2014)
#12Some things he says in this video bug me. 1. "Printing money doesn't always cause inflation." -- Printing money causes inflation under all cases unless money is literally destroyed at the same rate it is printed. A loan temporarily inflates the economy until it is paid off. By replacing credit with printed money you turn the "temporary inflation" into permanent inflation. 2. "Increase your productivity faster then yo…
productivity is people + machines(computers included). most productivity is created by getting a machines to do something people manually did before. you create wealth by creating a machine that is more productive than anyone else at the time.
Re: How the Economic Machine Works (2014)
#13Some things he says in this video bug me. 1. "Printing money doesn't always cause inflation." -- Printing money causes inflation under all cases unless money is literally destroyed at the same rate it is printed. A loan temporarily inflates the economy until it is paid off. By replacing credit with printed money you turn the "temporary inflation" into permanent inflation. 2. "Increase your productivity faster then yo…
> Printing money causes inflation under all cases unless money is literally destroyed at the same rate it is printed.
Absolutely not! Deflation occurs naturally in any growing economy--even when your currency is indestructible--as the same quantity of money-units is chasing a greater quantity of goods and labor.
Consider the case of a crew stranded on a deserted island, who choose to found a new civilization. They decide to use the 100 "buttons" they recovered from the ship as their currency since they cannot be forged on the island.
On day 30, a 1 button is worth a coconut.
On day 3000, the island is dotted with dwellings, fences keep in herds of domesticated animals, and a scattering of boats fishes offshore... A "button" is going to be worth a heck of a lot more than a coconut.
Re: How the Economic Machine Works (2014)
#14The most important part of this whole presentation is that credit drives everything. If you know how credit is coming into the economy you can anticipate credit cycles. Credit cycles are the only thing you have to keep your eye on in order to keep from getting destroyed in economic crashes. The credit cycle stuff is well explained by Austrian Business Cycle Theory[1], but that's a brain bender and once you get it wil…
That theory isn't widely accepted (like you'd see if you looked it up on wikipedia). mises.org is a libertarian organization advocating the austrian school of economics, which is often quite divorced from reality.
Re: How the Economic Machine Works (2014)
#15The most important part of this whole presentation is that credit drives everything. If you know how credit is coming into the economy you can anticipate credit cycles. Credit cycles are the only thing you have to keep your eye on in order to keep from getting destroyed in economic crashes. The credit cycle stuff is well explained by Austrian Business Cycle Theory[1], but that's a brain bender and once you get it wil…
That theory isn't widely accepted (like you'd see if you looked it up on wikipedia). mises.org is a libertarian organization advocating the austrian school of economics, which is often quite divorced from reality.
You've got it backwards. The Austrian school of economic thought is the only one that actually corresponds to reality.
You're not going to take my word it, but feel free to see for yourself. Watch their lectures on YouTube ("misesmedia"), and you'll get it.
Re: How the Economic Machine Works (2014)
#16Can anyone tell me what will happen to inflation when, let's say, in 50 years time we have a completely digital economy (e-money)? Would it not, in that special case, be impossible to stash the money under the proverbial mattress thus people may actually lose money simply by having it (in their current accounts, obviously)?
Re: How the Economic Machine Works (2014)
#17Some things he says in this video bug me. 1. "Printing money doesn't always cause inflation." -- Printing money causes inflation under all cases unless money is literally destroyed at the same rate it is printed. A loan temporarily inflates the economy until it is paid off. By replacing credit with printed money you turn the "temporary inflation" into permanent inflation. 2. "Increase your productivity faster then yo…
> Even Elon Musk as hard working as he is cannot achieve his level of income off of his own productivity alone.
Elon has specific role in "production". If his work/energy/decisions are going to spawn new factory, new technology or new product that is going to improve productivity of millions then by all means his income is justified by his productivity.
> Printing money causes inflation under all cases unless money is literally destroyed at the same rate it is printed.
This is not true. Emphasis on "all cases". If you create money at exactly the same rate as the economy's produce grows than money has it's background in actual "things" that have value.
As for other arguments I think author was trying to convey very complex subject in 30 minutes of video. Of course there will be certain generalizations so he can better convey the message.
Re: How the Economic Machine Works (2014)
#18This is a very good explanation for the debt cycles and the role of banks, gov't, central bank et al.
There is one point it doesn't explain, though. It appears that the severity of the debt cycles can be reduced and social stability improved if the economy weren't fueled by credit to such a degree ($3 trillion in money, $50 trillion in credit, wow). So why have so much lending? The video does briefly answer that question with the need to finance economic investments (i.e. things that can improve future income, e.g. a tractor).
That is only a partial answer. The narrower version of the question remains: why do we need so much lending for consumption? Is there any benefit at all in financing consumption with debt? It does increase present spending and economic activity, but only at the expense of reducing future spending and hurting future economic activity.
Re: How the Economic Machine Works (2014)
#19Can anyone tell me what will happen to inflation when, let's say, in 50 years time we have a completely digital economy (e-money)? Would it not, in that special case, be impossible to stash the money under the proverbial mattress thus people may actually lose money simply by having it (in their current accounts, obviously)?
People are losing money by simply having it. Even if you store it in a normal bank account that gives interest rates inflation will eat up the interest and then some.
Re: How the Economic Machine Works (2014)
#20From Andrew Sorkins' commentary on: http://dealbook.nytimes.com//2013/10/21/economic-theory-via-... > [Ray Dalio] dispenses with the way economists have long taught economics in school, and instead explains the economy as if it were a “machine” that he believes is much easier to understand and predict. "Dispenses", really? Dalio is no small force [1], but his thoughts and models are, in some sense, just "another" mod…
I don't understand how this video represents a departure from standard macroeconomic thinking. He presents the business cycle, with a boom as an inflationary period and a bust as a deflationary one leading into recessions, the idea of credit creating debt which can be an asset, a very simplified version of the role of the central bank (really, it's all very simplified, it's only a half-hour), and, most importantly, a…
Spoken like a true sophist.
So anything that's not mainstream is just as crazy as thinking that the earth is flat, huh?
For example, it's decidedly mainstream to believe that ~2% inflation is a good thing, mostly because governments say so.
But it's plain crazy to disagree, realizing that not a single sane person on earth actually wants his purchasing power to decrease, but that's exactly what the 2% inflation does to us.