The Speed of an Economic Recovery

[lumpymunk]

//http://krugman.blogs.nytimes.com/2012/01/23/more-than-you-want-to-know-about-warren-harding/?_r=0

Krugman's graph at the bottom proves him wrong.

- Where is the impact of the stimulus? Absent.
- Where is the dangerous deflationary spiral he's always warning about?  Absent.

The economy did not bottom out and collapse, it bottomed out and stabilized.

The point is not stimulus vs no stimulus, it's about the speed of a recovery being faster without the government filling in "demand gaps" and deficit spending.

Also the concept of a "liquidity trap" is nonsense.

Now, contrary to popular thinking, individuals don't save money as such. The chief role of money is as a medium of exchange. Also, note that people don't pay with money but rather with goods and services that they have produced.

For instance, a baker pays for shoes by means of the bread he produced, while the shoemaker pays for the bread by means of the shoes he made. When the baker exchanges his money for shoes, he has already paid for the shoes, so to speak, with the bread that he produced prior to this exchange. Again, money is just employed to exchange goods and services.

To suggest then that people could have an unlimited demand for money (hoarding money) that supposedly leads to a liquidity trap, as popular thinking has it, would imply that no one would be exchanging goods.

Obviously, this is not a realistic proposition, given the fact that people require goods to support their lives and well-being. (Please note: people demand money not to accumulate indefinitely but to employ in exchange at some more or less definite point in the future).

https://mises.org/daily/5881/Is-the-Uni ... idity-Trap

The idea that everyone would prefer to hoard money and starve is incredibly stupid.

[entropy]

Okay, we are beginning to track over the top of the arguments that are going on between Thomas Woods (//http://mises.org/daily/3788) and Daniel Kuehn (//http://cje.oxfordjournals.org/content/36/1/155.abstract) and Krugman. I'll leave it at letting others read their arguments and decide which makes more sense.

[lumpymunk]

Damn I can't figure out how to download that for free.

I found something in researching that viewpoint that I will address though.

Certainly if fiscal austerity was an important determinant of recovery, as some claim, the deep cuts of the Wilson administration should have prevented us from ever falling into the 1920-21 depression in the first place!

http://www.factsandotherstubbornthings. ... 20-21.html

This is incorrect.  The goal of fiscal austerity is not to avoid depressions/recessions or ease them, it's to allow them to be as severe as they need to be in order to correct the distortions that created the bubbles.  This is why looking at current post-2008 Keynesian economic policies is important... because it helps explain why the current "recovery" is so slow (and I would argue hasn't even begun).

In 2008 this would have meant letting banks fail, letting Fannie and Freddie go under, allowing mortgage speculators go bust, allowing prices of homes to fall as far as needed to clear the market (as opposed to homes sitting vacant), no TARP, no federal reserve pumping or quantitative easing.  It's been 5 years... at what point do we look at this skyrocketing debt and acknowledge that "Keynes was wrong."

[LikelyToBreak]

lumpymunk wrote in part:

:LTB
Traditionally, the decent paying jobs for the lower middle class were in manufacturing. That is no longer the case because the manufacturing jobs have gone overseas. We could look at what we are doing to cause manufacturing jobs to go overseas.

...and south of the border. Liberals don't like the answer to this question... but those that believe in the free market have no problem with it because the answer is obvious. It's a dirty little secret for liberals I guess.

I think we have to look at the influence of the Federal Reserve in all the above sited cases.  As well as FDR's gold confiscation and Nixon taking us off the gold standard.  Fed was supposedly established to reduce inflation and depression cycles.  Look at this graph and see if they succeeded in the least.

I contend that the Fed is the problem.  The large banks having control of the Fed make out like bandits by being able to control the money supply.  Inflation means more people borrow money and depression gives them the chance to gobble up their smaller competitors.  But, it has to be a hard depression or their competitors might weather the storm.

As long as the Fed controls our money it doesn't make much difference what the politicians do.  And what the politicians do, do is take orders from the Fed.  The banks promised a collapse of the entire money system if they didn't get their 2008 bailout.  Which is why the politicians went along with it.  What choice did they have?  No politician wants to be the one blamed for the end of the United States as we know it.  They are just putting off the inevitable collapse until they are out of office.  They know this, but they aren't about to admit it to the electorate.

So, the politicians pretend to control the Fed with bank employees getting Federal Paychecks.  Like the multimillionaires who get the posts really are worried about the pittance paid to them by the people of the US.  The Fed also controls most of the press in the country.  They can get the press to spin stories to their advantage with bribes or have those who don't "play-ball" fired and discredited.  

We need a revolt against the Federal Reserve, which is a organized criminal syndicate of banks, not new politicians.

[lumpymunk]

It's not as conspiratorial as you're making it sound, it's just a century worth of bad economic ideas.  People like Greenspan, Bernanke, and Krugman are just following the Keynes playbook... and politicians don't know shit so they just do what the intellectuals tell them is best (or do what whoever lobbies the hardest tells them to do).

People write off sound Austrian economics as "outdated" but this Keynesian shit ain't working.  It already caused and prolonged the Great Depression, and the Great Recession... and that inflation graph will be why the world decides that the Dollar should no longer remain as the worlds reserve currency.

When that happens we will instantly and irrevocably lose the ability to just print money out of thin air and buy free shit with it.  That's when the real crash happens.  How long before the "government bubble" (as Peter Schiff calls it) pops and the world loses faith in the dollar?

[entropy]

Here's the URL of a site where you can download a draft of Kuehn's paper:

//http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1591030

Again, I'll let others read through his arguments and Krugman's arguments and compare them to yours and let them decide for themselves which is more convincing.

[LikelyToBreak]

lumpymunk wrote in part:

It's not as conspiratorial as you're making it sound, it's just a century worth of bad economic ideas.

History is all about conspiracies.  The colonists conspired to rebel against the crown.   The southern states conspired to rebel against the union.  Why would you doubt that some rich guys got together to conspire to make more money?

I maintain the large bankers got together and conspired to create the "Third National Bank of the United States."  Knowing they had to throw people off tract, because they had tried to do so and felled, they decided to call it the "Federal Reserve."  Look it up, the bill establishing the Federal Reserve was passed by the "House, on December 22, 1913, agreed to the conference report on the Federal Reserve Act bill by a vote of 298 yeas to 60 nays, with 76 not voting. The Senate, on December 23, 1913, agreed to it by a vote of 43 yeas to 25 nays with 27 not voting." (1)  It is alleged by many, that Congress was closed for the Christmas break, then when all those "not voting" left town, it was reconvened so the bill could be passed.  Maybe it wasn't a conspiracy but when it quacks like a duck and walks like a duck, well maybe it just is a duck.
 
lumpymunk wrote in part:

When that happens we will instantly and irrevocably lose the ability to just print money out of thin air and buy free shit with it. That's when the real crash happens. How long before the "government bubble" (as Peter Schiff calls it) pops and the world loses faith in the dollar?

I don't think any of the old economic models will get us out of our current situation.  But, I do agree the "government bubble" will pop.  It is how it is handled, which determines how bad the pop will effect all of us.  If the Fed is still around after the pop, it will be really bad for us.  As it is led by psychopaths who don't give a damn about us.  And the politicians will be looking for anything they can to hang on to.  Marital law and a dictator will be something they can grab on to.  It might be something you want consider when planning for your future.  

1 //http://en.wikipedia.org/wiki/Federal_Reserve_Act

[lumpymunk]

Here's the URL of a site where you can download a draft of Kuehn's paper:

//http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1591030

Again, I'll let others read through his arguments and Krugman's arguments and compare them to yours and let them decide for themselves which is more convincing.

Thesis seems to primarily be that he doesn't like that Austrians are giving credit to Harding, which misses the point.  He makes the (mostly unimportant) point that Wilson was already slashing government spending and balancing the budget.  The important thing to point out is that the essence of Harding's speech (in my original post) is what Austrians believe captures the pervading mentality toward fiscal policy of the time.  Additionally he attempts to credit the Fed for this swing in Monetary policy rather than Wilson/Harding for sound fiscal policy... why I'm not sure.  I guess it needs to be understood that fiscal policy of the government drives monetary policy at the Fed... and not the other way around.

Another thesis is that he claims that deflation is compatible with Keynes views... despite Keynes emphasis on "price stability" and disagreement with the price instability (drops) that the deflation brought about.  This seems like an obviously disingenuous position to take.  In fact, despite the article's choice to ignore it, is that Keynes openly argued against deflationary policies in post WWI.  How then... is this even a relevant point?

http://socialdemocracy21stcentury.blogs ... ation.html

[Colanth]

We could increase tariffs and fight overseas to have tariffs and other hindrances to us selling overseas lifted.

That's a self-contradiction.  (Or it's part of "what good is it to be an American if we can't bully the rest of the world" which is part of what got us into the mess we're in.)

[Colanth]

Most recent release from the IPCC has a hard time explaining why their models predicted catastrophe and the temperatures over the last 15 years have barely increased

If you consider a 2 degree increase "barely", then there's no problem.  If you consider it a catastrophe (which it is), you realize that there's a huge problem.  (No, a 2 degree rise in global temperature doesn't mean that instead of being 73 this evening it would have been 71.  We can even see areas of VERY REDUCED temperatures with global warming.)

despite their 95% certainty that we are responsible for global warming.

No, the certainty that we can reduce it.  Whether we caused it is totally irrelevant.  Science writers seldom understand science.

We've had one of the mildest hurricane seasons since the 1970s this year.

With global warming, we'd expect fewer hurricanes.  And that's what we're seeing.  But if you call last October "mild", you have to live on Jupiter.

Please don't make these ludicrous statements in a forum with members who actually understand global warming.

[Colanth]

To suggest then that people could have an unlimited demand for money (hoarding money) that supposedly leads to a liquidity trap, as popular thinking has it, would imply that no one would be exchanging goods.

Obviously, this is not a realistic proposition, given the fact that people require goods to support their lives and well-being. (Please note: people demand money not to accumulate indefinitely but to employ in exchange at some more or less definite point in the future).

The idea that everyone would prefer to hoard money and starve is incredibly stupid.

The idea that some would is proven, if you look at history.  Accumulation of wealth is one of the major causes of depressions.  It doesn't take everyone, just almost every dollar (and almost all the money is controlled by a tiny percentage of the people - who can afford to hoard almost all they have and still overeat 3 times a day).

[lumpymunk]

Please don't make these ludicrous statements in a forum with members who actually understand global warming.

If you're so confident why posture like you don't want to be challenged?

If you consider a 2 degree increase "barely", then there's no problem.  If you consider it a catastrophe (which it is), you realize that there's a huge problem.  (No, a 2 degree rise in global temperature doesn't mean that instead of being 73 this evening it would have been 71.  We can even see areas of VERY REDUCED temperatures with global warming.)

2 degrees is "barely" when you compare it to predictions from models... and you can look at them attempting to explain why the increase has been so flat.

No, the certainty that we can reduce it.  Whether we caused it is totally irrelevant.  Science writers seldom understand science.

No, the "95%" is a confidence interval for how certain the IPCC is that human action is impacting the climate.  Specifically... that the burning of fossil fuels since the 1950s is the main cause of warming.  Read the fucking report.  In previous reports the confidence interval was lower.  It's a statistical calculation they're doing... and it has nothing to do with whether we can reduce it.

With global warming, we'd expect fewer hurricanes.  And that's what we're seeing.  But if you call last October "mild", you have to live on Jupiter.

Oh fucking please...
The Alarmism has been nothing but "more hurricanes" and "more tornadoes" and "more severe weather" for the last fucking decade.  You are NOT allowed to just flip your position and expect to get away with it.

http://www.wunderground.com/resources/c ... cc2007.asp
http://www.ipcc.ch/publications_and_dat ... 3-6-3.html

Now you're going to claim the opposite?  HA!  

[lumpymunk]

To suggest then that people could have an unlimited demand for money (hoarding money) that supposedly leads to a liquidity trap, as popular thinking has it, would imply that no one would be exchanging goods.

Obviously, this is not a realistic proposition, given the fact that people require goods to support their lives and well-being. (Please note: people demand money not to accumulate indefinitely but to employ in exchange at some more or less definite point in the future).

The idea that everyone would prefer to hoard money and starve is incredibly stupid.

The idea that some would is proven, if you look at history.  Accumulation of wealth is one of the major causes of depressions.  It doesn't take everyone, just almost every dollar (and almost all the money is controlled by a tiny percentage of the people - who can afford to hoard almost all they have and still overeat 3 times a day).

Link me one news article of one death-by-starvation from refusal to exchange money for food.

Completely asinine.  

[Plu]

You're saying it like "nobody would hoard their money while starving", which makes sense. Colanth is saying that wealth is hoarded by the rich while the poor starve because they don't have any money to exchange for food, which is also true.

If everyone has the same level of resources, your logic would make sense. But they don't, so your logic doesn't work. People can hoard their wealth and eat, and they're doing just that. And those without wealth are starving from others hoarding money as a result.

[lumpymunk]

I agree with the other guy

Okay, and?

I can give annoying simplistic answers too... here's this again.

https://mises.org/daily/5881/Is-the-Uni ... idity-Trap

It's pretty easy to figure out you're mischaracterizing the disagreement if you just skip to the end.

Contrary to Krugman, we suggest that the US economy is trapped, not because of a sharp increase in the demand for money, but because loose monetary policies have depleted the pool of real savings. What is required to fix the economy is not to generate more inflation but the exact opposite. Setting a higher inflation target, as suggested by Krugman, will only weaken the pool of real savings further and will guarantee that the economy will stay in a depressed state for a prolonged time.