Author Topic: A Survey on the Importance of Prices  (Read 11071 times)

Offline surly74

Re: A Survey on the Importance of Prices
« Reply #120 on: August 28, 2013, 01:57:10 PM »
Quote from: "The Whit"
You're making the same error in analysis that Keynes made.  He sees savings as idle resources, but they're not.  Those savings don't just sit in an account and rot, banks take those savings and loan them out at interest.  As a result, banks give interest to those who have savings accounts (less than the interest they charge for loans) to attract money to loan.  So, savings are NOT idle.  Savings drive consumption.

I'm aware of what banks do with the money people deposit. How can you say savings drive consumption? those are completely polar opposite. If I'm saving my money I'm not purchasing anything. There is money to loan out but I'm not needing a loan because I'm not spending the money I have saved.

If everyone saved their money consumer purchasing would halt. That is going to have a negative effect because producers are having a hard time with sales. As a producer I don't want people saving their money.

I've read the criticisims to the paradox of thrift but there seems to be too many assumptions made to criticize the paradox when it comes to loanable funds.

Quote
That's only because the prices aren't allowed to fluctuate.  If the dollar strengthened and prices were allowed to fluctuate to accommodate for that, there would be no net difference in trade.

prices can and do flucuate all the time. is there something specifc you are talking about that can't flucuate?

In my situation (trade with Canada and US) I sell my product for a certain price. My price is close to what my competitors in the US sell it for because the two dollars are very close. 10 years ago when the canadian dollar was 60 cents to the US dollar life was easy. I could lower my price far below any US competitor and sell more based on price alone.
God bless those Pagans
--
Homer Simpson

Offline Plu

Re: A Survey on the Importance of Prices
« Reply #121 on: August 28, 2013, 02:04:51 PM »
Quote
If it effects them people will fund it, which is why most of the tax money needs to stay inside the citizen's state and even more preferably inside their county. If the roads start going to crap people will shift their tax money to road maintenance. If there aren't enough fire fighters, or police, or judges, people will shift their money to those services.

I'm not okay with an "we'll fix it when it breaks" approach to social services. It's expensive enough to keep a country running when you keep things in good repair, but when you have to wait for people to feel the effects of not enough fire fighters, or police, or judges (you realise that 'feeling the effect' means people dying and homes burning down, right?) then it'll be that much more expensive to restore, assuming it's still possible.

There's a good reason we keep things maintained instead of waiting for them to crash and burn before acting on it. If you introduce a system where that maintenance no longer exists for whatever reason, you are introducing a bad system.

Quote
The federal government is the furthest removed for local problems and will be the least effective at solving these problems, and they are the furthest removed from the populace making it harder to hold them accountable.

This I agree with. Keep most of the money close. Or at the very least, don't have a big pot that any county can claim from. I'd understand the idea of shifting extra tax to areas that have less income for whatever reason, but to pile it up and give it to whomever has the best story doesn't work.

Quote
Because the government is not part of the market place. In the market place, consumer action influences market prices so resources are used to meet demand. When the government spends money to subsidize tuition they are meddling with the cost of that service and sending skewed signals to the consumers. These consumers act on these signals, and supply must adjust to meet the adjusted demand. It does so by increasing prices so it can invest in expansion and lower demand to a level it can meet. If federal funding for tuition is not increased, the market will find it's new equilibrium.

You'd think that if there's high demand, supply would change so they can handle more demand, not raise prices so that demand becomes lower. If you're doing the latter, you are pretty much creating artificial scarcity, which puts the problem-side with the companies refusing to cater to the growing demand, not with the government that's creating that demand by helping consumers afford the goods.
You are not allowed to view links. Register or Login

Offline Colanth

Re: A Survey on the Importance of Prices
« Reply #122 on: August 28, 2013, 03:44:43 PM »
Quote from: "surly74"
Quote from: "The Whit"
You're making the same error in analysis that Keynes made.  He sees savings as idle resources, but they're not.  Those savings don't just sit in an account and rot, banks take those savings and loan them out at interest.  As a result, banks give interest to those who have savings accounts (less than the interest they charge for loans) to attract money to loan.  So, savings are NOT idle.  Savings drive consumption.

I'm aware of what banks do with the money people deposit.
Banks don't actually loan out the money on deposit - that would be a stupid loss of profit.  In the US, large banks have to hold a 10% reserve for loans.  (IOW, if you have $1 million out in loans, you have to have only $100k in your vault or on deposit in the Fed.)  If a bank has $1 million on deposit, and loans money on deposit, it can earn interest on $1 million.  If it uses the $1 million as its reserve, it can earn interest on $10 million in loans.

Of course that's all fiat money, which is one of the main problems with the current financial situation in the world.
Afflicting the comfortable for 70 years.
Science builds skyscrapers, faith flies planes into them.

Offline Colanth

Re: A Survey on the Importance of Prices
« Reply #123 on: August 28, 2013, 03:51:45 PM »
Quote from: "Plu"
You'd think that if there's high demand, supply would change so they can handle more demand, not raise prices so that demand becomes lower. If you're doing the latter, you are pretty much creating artificial scarcity, which puts the problem-side with the companies refusing to cater to the growing demand, not with the government that's creating that demand by helping consumers afford the goods.
1973.  Oil crisis.  Remember?  In the US, we had alternate day gasoline purchasing, and the price skyrocketed.  Due to a shortage in oil, right?

Wrong.  Oil tankers were anchored in harbors, so closely packed that one friend of mine claimed that you could walk from Galveston to Houston without touching water.  Why?  There was no place to put all that oil.  There was no shortage, the refineries were just not refining it, to create a "shortage", so they could inflate prices.

So does it happen?  Of course.
Afflicting the comfortable for 70 years.
Science builds skyscrapers, faith flies planes into them.

Offline Plu

Re: A Survey on the Importance of Prices
« Reply #124 on: August 28, 2013, 03:56:33 PM »
Quote
1973. Oil crisis. Remember?

Uh, no. That was 13 years before I was born, and on the other side of the world. :P

And obviously that happens; I just want to make it clear who is being the bad guy when it happens. I don't buy that the government is the bad guy for creating more demand; the supplier is the bad guy for upping the prices instead of increading the available supply.
You are not allowed to view links. Register or Login

Re: A Survey on the Importance of Prices
« Reply #125 on: August 28, 2013, 04:21:03 PM »
Quote from: "surly74"
I'm aware of what banks do with the money people deposit. How can you say savings drive consumption? those are completely polar opposite. If I'm saving my money I'm not purchasing anything. There is money to loan out but I'm not needing a loan because I'm not spending the money I have saved.
You're correct that you're not the one using those resources, but when that money gets loaned out, the person that took out the loan DOES use it to consume.  They pay back + interest to the bank and the bank then pays it back to you, the saver, through interest.

Just because YOU aren't using something doesn't mean it doesn't get used.  Let's say you're not using a TV so you put it in storage.  That is a resource that is going unused.  If the storage unit were able to rent that TV out to someone else for a small fee, that TV is not an idle resource because someone is using it.

Quote
If everyone saved their money consumer purchasing would halt. That is going to have a negative effect because producers are having a hard time with sales. As a producer I don't want people saving their money.
You don't want people to save all of their money, but who the hell would?  People need money to do things, like live, but just because some of that goes into a savings account does not mean it just sits there like it's in "timeout".

Quote
I've read the criticisims to the paradox of thrift but there seems to be too many assumptions made to criticize the paradox when it comes to loanable funds.
A recession is exactly why we need savings.  When there is a recession we need those savings to draw on to prop up the economy.  Think about old agricultural societies saving the harvest for winter or the next year.  When the next harvest isn't so good, the society survives by pulling from it's pooled resources.  The market adjusts supply to meet demand and the society lives on for another year.  If that society did not save enough food to feed everyone through the drought demand will fall to meet supply in the form of EVERYONE STARVING TO DEATH.  It's the same way with money.

In a recession, people pull from their savings to pay the bills.  This will shorten the supply of savings.  Having less money to loan out, banks will increase interest rates on loans.  This means that only projects that yield a higher return than the going interest rate will get funded, but that's part of the system correcting itself.  As the bank sees it's loanable funds start to dry up it will increase interest rates on savings to attract more investors.  Those who have the funds to invest will do so, putting money back into the loanable funds pool and interest rates will stabilize.  As this occurs, banks will lower interest rates on loans to compete with each other for your business.  As these interest rates drop, loans increase.  Those companies that get these loans hire more people and expand, this lowers the unemployment rate and puts more cash in circulation, in turn increasing the amount of money that can be used for savings.  This then snowballs into prosperity, and your economy is healthy as an ox.

Quote
prices can and do flucuate all the time. is there something specifc you are talking about that can't flucuate?

In my situation (trade with Canada and US) I sell my product for a certain price. My price is close to what my competitors in the US sell it for because the two dollars are very close. 10 years ago when the canadian dollar was 60 cents to the US dollar life was easy. I could lower my price far below any US competitor and sell more based on price alone.
If the value of a dollar falls, the price of goods should rise in response to that fall in value.  If the value of the dollar rises, prices should fall.  The value of the currency is an indicator of another factor, not the driving force.
"Death can not be killed." -brq

Re: A Survey on the Importance of Prices
« Reply #126 on: August 31, 2013, 12:20:36 PM »
I didn't run everyone off did I?
"Death can not be killed." -brq

Offline Hijiri Byakuren

  • ULC Minister, Honorary Doctor of Divinity
  • Jacuzzi Member
  • *
  • Posts: 5506
  • Total likes: 2183
  • That's DOCTOR Hijiri, to you!
    • Sargon Lore
Re: A Survey on the Importance of Prices
« Reply #127 on: August 31, 2013, 12:27:56 PM »
Quote from: "The Whit"
I didn't run everyone off did I?
I think the new theist troll has them a bit distracted.
You are not allowed to view links. Register or Login

Speak when you have something to say, not when you have to say something.

Re: A Survey on the Importance of Prices
« Reply #128 on: August 31, 2013, 01:11:31 PM »
A goldfish wandered into the shark tank?
"Death can not be killed." -brq

 

SMF spam blocked by CleanTalk