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How the Economic Machine Works (2014)

economicprinciples.org

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Re: How the Economic Machine Works (2014)

#31

Post by jes »

refurb wrote: post #30
alecco wrote: post #25

Earlier quoted context omitted.

> 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.

Do low interest rates benefit savers? For example, senior citizens trying to live off the interest earned from their savings?

Re: How the Economic Machine Works (2014)

#32

Post by simonh »

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?

We're both just posting our opinions. Unless you consider youtube videos to be the gold standard for incontorvertible truth.

Re: How the Economic Machine Works (2014)

#33

Post by honeybooboo123 »

mikeash wrote: post #26
honeybooboo123 wrote: post #24

Earlier quoted context omitted.

>> 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?

Nope, I'm suggesting that we should be able to choose which currency to use. But now we can't.

If we could, we'd choose a sound currency, and then our purchasing power would keep increasing steadily (because of productivity improvements and wealth accumulating over time).

Re: How the Economic Machine Works (2014)

#34

Post by honeybooboo123 »

divegeek wrote: post #28
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…

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 livi…

Yes, salaries are a variable, but even if salaries do rise in sync with inflation, that doesn't make inflation good. It's still bad.

Nope, we can't expect our salaries to rise along with inflation - not in today's insane world.

  - http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/
  - http://www.theguardian.com/money/2011/nov/23/uk-household-earnings-fall
.. and whatever you'd feel like Googling up.

>> There are advantages to inflation. One is that it encourages people to keep their wealth invested in production

That's not an advantage. Inflation does punish saving (which is bad to begin with), but also encourages risky investments. The higher the inflation, the higher the return on investments you need to not lose wealth, and the riskier your investments, the more likely you're to lose them.

So no, that's not good. Purchasing power increases are good.

>> Another is that it discounts debt.

Yes, this is why governments keep lying to us that inflation is good for us. They're trying to manage their massive debts, but they'll ultimately fail.

How about just not using money you don't have, or money you can't afford to borrow? Oh but that would curtail politicians' crony-capitalist spending, so we can't have that.

>> The ideal would be a money supply that exactly kept pace with growth in production resulting in neither inflation nor deflation

You're basically suggesting that our purchasing power should not increase. That's just absurd.

>> Because mild inflation is not particularly harmful

So even you acknowledge that it is harmful, even if not to a large extent. But what do you get if there's 2% inflation for 10 years? It keeps compounding you know. How much of your purchasing power will you have lost by then?

>> deflation is really bad

No it's not. It's your purchasing power increasing. Everyone wants to get more for less, and that's what (price-)deflation means.

Re: How the Economic Machine Works (2014)

#35

Post by honeybooboo123 »

simonh wrote: post #32
honeybooboo123 wrote: post #22

Earlier quoted context omitted.

Just because you say so, I guess?

We're both just posting our opinions. Unless you consider youtube videos to be the gold standard for incontorvertible truth.

I'm suggesting you just listen to what they're saying and swiftly conclude that everything they say makes sense (because you're not an idiot).

Re: How the Economic Machine Works (2014)

#36

Post by honeybooboo123 »

divegeek wrote: post #27
honeybooboo123 wrote: post #22

Earlier quoted context omitted.

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 econom…

Well, I just responded to your other post, where you were economically confused :)

Velocity of money? Concomitant effects, huh? .. I suspect you might be some sort of government shill though. Very few actual Libertarians don't see Austrian economics for the rational truth it is.

Re: How the Economic Machine Works (2014)

#37

Post by mikeash »

honeybooboo123 wrote: post #33
mikeash wrote: post #26

Earlier quoted context omitted.

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?

Nope, I'm suggesting that we should be able to choose which currency to use. But now we can't. If we could, we'd choose a sound currency, and then our purchasing power would keep increasing steadily (because of productivity improvements and wealth accumulating over time).

We can't? I mean, I have to obtain USD to pay my taxes, but otherwise I can use currencies at will. I have a hard time finding anyone local who will accept or pay me in anything besides USD, but that's their own choice to do so.

Re: How the Economic Machine Works (2014)

#39

Post by divegeek »

honeybooboo123 wrote: post #34
divegeek wrote: post #28

Earlier quoted context omitted.

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 livi…

Yes, salaries are a variable, but even if salaries do rise in sync with inflation, that doesn't make inflation good. It's still bad. Nope, we can't expect our salaries to rise along with inflation - not in today's insane world. - http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/ - http://www.theguardian.com/money/2011/nov/23/uk-household-earnings-fall .. and w…

Sorry, you're badly confused about a lot of things, but it's not worth the effort to me to educate you. I'll just let you have the last word.

Re: How the Economic Machine Works (2014)

#40

Post by refurb »

jes wrote: post #31
refurb wrote: post #30

Earlier quoted context omitted.

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

Do low interest rates benefit savers? For example, senior citizens trying to live off the interest earned from their savings?

In the short-term it certainly benefits consumers who are using debt to finance their consumption (e.g. houses, cars).

In the long run (at least for the housing market) the benefit goes away as housing prices adjust to reflect lower borrowing costs.

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