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How the Economic Machine Works (2014)

economicprinciples.org

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Re: How the Economic Machine Works (2014)

#21

Post by simonh »

honeybooboo123 wrote: post #15
zurn wrote: post #14

Earlier quoted context omitted.

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.

The Austrian theory offers some important insights and a lot of it's ideas are valuable. That is why it is widely considered a precursor of modern credit cycle theory, but carrying it's conclusions too far without considering other factors such as savings rates, fiscal and monetary policy.

Re: How the Economic Machine Works (2014)

#22

Post by honeybooboo123 »

simonh wrote: post #21
honeybooboo123 wrote: post #15

Earlier quoted context omitted.

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.

The Austrian theory offers some important insights and a lot of it's ideas are valuable. That is why it is widely considered a precursor of modern credit cycle theory, but carrying it's conclusions too far without considering other factors such as savings rates, fiscal and monetary policy.

Just because you say so, I guess?

Re: How the Economic Machine Works (2014)

#23

Post by laichzeit0 »

honeybooboo123 wrote: post #20
cbd1984 wrote: post #8

Earlier quoted context omitted.

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…

> not a single sane person on earth actually wants his purchasing power to decrease

As with all things in life, this is a tradeoff. I'm willing to concede decreasing purchasing power in exchange for some other advantage. Like I'm willing to exchange shitty battery life for a better and faster web browsing experience on my phone, or how I'm willing to exchange years off my life for some added pleasures like cigarettes and alcohol.

Re: How the Economic Machine Works (2014)

#24

Post by honeybooboo123 »

laichzeit0 wrote: post #23
honeybooboo123 wrote: post #20

Earlier quoted context omitted.

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…

> not a single sane person on earth actually wants his purchasing power to decrease As with all things in life, this is a tradeoff. I'm willing to concede decreasing purchasing power in exchange for some other advantage. Like I'm willing to exchange shitty battery life for a better and faster web browsing experience on my phone, or how I'm willing to exchange years off my life for some added pleasures like cigarettes…

>> I'm willing to concede decreasing purchasing power in exchange for some other advantage

That may be, but that's something everyone should get to choose for themselves. In today's world, we don't, and that's wrong.

Besides, we're not even getting any advantages "in exchange" for losing our purchasing power to the machinations of governments and central banks everywhere. We're just getting milked and fleeced six ways from Sunday all the time.

Re: How the Economic Machine Works (2014)

#25

Post by alecco »

avz wrote: post #18

This 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 ques…

> why do we need so much lending for consumption? Is there any benefit at all in financing consumption with debt?

The benefit is for corporations. And allegedly that trickles down to people/employees. But that's obviously not the case for this current recovery in US. It's a sham.

Re: How the Economic Machine Works (2014)

#26

Post by mikeash »

honeybooboo123 wrote: post #24
laichzeit0 wrote: post #23

Earlier quoted context omitted.

> not a single sane person on earth actually wants his purchasing power to decrease As with all things in life, this is a tradeoff. I'm willing to concede decreasing purchasing power in exchange for some other advantage. Like I'm willing to exchange shitty battery life for a better and faster web browsing experience on my phone, or how I'm willing to exchange years off my life for some added pleasures like cigarettes…

>> I'm willing to concede decreasing purchasing power in exchange for some other advantage That may be, but that's something everyone should get to choose for themselves. In today's world, we don't, and that's wrong. Besides, we're not even getting any advantages "in exchange" for losing our purchasing power to the machinations of governments and central banks everywhere. We're just getting milked and fleeced six way…

Are you proposing that each person should be able to choose the level of inflation that their own assets are subject to? How would that work?

Re: How the Economic Machine Works (2014)

#27

Post by divegeek »

honeybooboo123 wrote: post #22
simonh wrote: post #21

Earlier quoted context omitted.

The Austrian theory offers some important insights and a lot of it's ideas are valuable. That is why it is widely considered a precursor of modern credit cycle theory, but carrying it's conclusions too far without considering other factors such as savings rates, fiscal and monetary policy.

Just because you say so, I guess?

No need to take his word for it. If you look at the Austrian school theories you'll see that those things aren't accounted for. Another crucial element that isn't considered is velocity of money, and the concomitant effects on money supply. The Austrian school has a lot of important insights, but it omits several important factors. It has a good and useful set of ideas, but it's not the grand unified theory of economics that many libertarians (like me) wish it were.

Re: How the Economic Machine Works (2014)

#28

Post by divegeek »

honeybooboo123 wrote: post #20
cbd1984 wrote: post #8

Earlier quoted context omitted.

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…

Inflation doesn't decrease your purchasing power unless you're living on a fixed, non inflation-adjusted income, or from a limited pool of wealth which you keep in cash.

If you're doing productive work, you can expect your wages to keep pace with inflation, and if they're not, it's very likely that without inflation you'd be seeing wage cuts; your relative value as a worker is independent of inflation. If you're living off of stored wealth, you need to store it in the form of goods, not cash. Real estate, stocks, etc.

There are advantages to inflation. One is that it encourages people to keep their wealth invested in production (aside: This is also part of the economic value proposition for property taxes, which discourage non-productive land-hoarding). Another is that it discounts debt. Because debt payments are not inflation-adjusted and wages effectively are, making your payments gets easier over time. This isn't a good in and of itself, but it's a good when considered against the alternative possibility of deflation, which tends to create insolvency among borrowers. Of course, inflation can harm creditors who don't factor it into their interest rate, but this is less harmful to the economy as a whole.

The ideal would be a money supply that exactly kept pace with growth in production resulting in neither inflation nor deflation. But that's hard. Because mild inflation is not particularly harmful, and deflation is really bad, policymakers prefer to aim for mild inflation as a hedge against deflation.

Re: How the Economic Machine Works (2014)

#29

Post by pdecker »

avz wrote: post #18

This 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 ques…

I don't think we necessarily "need" lending for consumption, we like it. We like being able to buy a house when we only have 10% to put down...same thing goes for a car...or a tv...or our clothes, fancy dinners, etc. We want all these things, but most of us can't afford to pay for them in cash. So we leverage up. We don't need credit. We like it.

Re: How the Economic Machine Works (2014)

#30

Post by refurb »

alecco wrote: post #25
avz wrote: post #18

This 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 ques…

> why do we need so much lending for consumption? Is there any benefit at all in financing consumption with debt? The benefit is for corporations. And allegedly that trickles down to people/employees. But that's obviously not the case for this current recovery in US. It's a sham.

The benefit is for corporations.

I don't think that's true. Low interest rates benefit everyone as the cost of lending decreases.

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