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On February 12 2012 00:42 Gaga wrote:the bank will ofc not give you a positive interest rate if you just put it onto a check account at a bank. but probably they would charge a little less if you wouldnt out it into the bank. and thats the idea ... in a picture ![[image loading]](http://www.humonde.de/images/article/zinstreppe.jpg) its german but i guess u can get the idea. from top to bottom the translation of the steps is : long term assets short term assets checking accounts cash
Yes?
And those deposits get loaned out to investors who make positive NPV investments. Not malinvesments as we see today (since they get the capital from printed money rather than saved money. Saved money can be used to buy future consumption goods).
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On February 12 2012 00:56 Hider wrote:Show nested quote +On February 12 2012 00:42 Gaga wrote:the bank will ofc not give you a positive interest rate if you just put it onto a check account at a bank. but probably they would charge a little less if you wouldnt out it into the bank. and thats the idea ... in a picture its german but i guess u can get the idea. from top to bottom the translation of the steps is : long term assets short term assets checking accounts cash Yes? And those deposits get loaned out to investors who make positive NPV investments. Not malinvesments as we see today (since they get the capital from printed money rather than saved money. Saved money can be used to buy future consumption goods).
This is so stuped as i stated before in this thread. As you can see from the image, the interest rate origin is moved downwards. Inflation does exactly the same, that's why central banks like to have some 2-3% of inflation. So an investment with say 1,5% interest rate actually loses value over time. If inflation raises (e.g. by printing money) capital is forced into investment. No need to reinvent the monetary system in order to achieve this.
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On February 12 2012 00:23 Hider wrote:Show nested quote +On February 11 2012 23:41 WhiteDog wrote:On February 11 2012 03:58 Hider wrote:On February 11 2012 00:50 WhiteDog wrote:On February 11 2012 00:31 Hider wrote:On February 11 2012 00:19 WhiteDog wrote:On February 10 2012 23:55 SilentchiLL wrote:On February 10 2012 23:37 WhiteDog wrote:On February 10 2012 23:18 Velr wrote:On February 10 2012 23:18 WhiteDog wrote:
[quote]
Maybe the government employs can create wealth and because of that pay their own salary ?
Also, the salary given to the government employee is actually used by them for consumption - so they create a demand and because of that permit the private sector to exist. In theorie that can work. In Greece it obviously didn't  . Of course it didn't work in a free market environment (the EU zone). The money that the government gave to the government emloyee was most likely used to buy german, english or french goods and not greek goods... So you'd want to fall back to the times when mercantilism was in? Not at all. There are two solution : either the europe decide to give themselves some kind of economic policy in order to help the weakest link of the euro zone to create themselves comparativ advantages, or you permit some country to temporarily get out of the free zone to create those advantages (it is the idea, described by Mill, of the industry at birth). On February 11 2012 00:13 Hider wrote:On February 10 2012 23:18 WhiteDog wrote:On February 10 2012 23:07 Ryuhou)aS( wrote:
I've heard the Greece's government employs some number over 50% of the greek people. I was just wondering, how nobody else noticed that taxes of the minority (in this case Greek citizens NOT employed by the government) pay the paychecks of the majority. ..It just doesn't make any sense, the constant and neverending build up of government, and I think it's probably what had the most to do with the Greek economy crashing. Maybe the government employs can create wealth and because of that pay their own salary ? Also, the salary given to the government employee is actually used by them for consumption - so they create a demand and because of that permit the private sector to exist. If you discount "production created" with oppurtunity cost, then government is destroying wealth. The formula could look like this: You have a scare amount of ressources (consiting of labour and commodities). Either the government owns these ressources or the private sector does. You can't have both. Wealth created = The value of the government transformation (=from ressources to final product) proces (of these ressources) - The value of the private sector transformation proces (given they had the ability to use those ressources). This btw is a completely standard way of measuring wealth creation as an economist (thinking in terms of opp. costs.). (Its not just austrians who defines wealth creation in this way.) What you are describing is the eviction effect (crowding out in english I think). Since the eviction effect is not total (or you are a monetarian and this discussion is just ridiculous) then the government is creating wealth. The whole idea of the public policies is that the private sector does not have the ressource to create any wealth. Not to mention the state is one of the only economical agent that can endebt itself that much. They create less than the private sector, but they create wealth. There is no discussion about that. I suggest you accept that the economy is not as simple as you would like to. I'm sure you would be really interesting if you were not trying to make us believe that the state is always a bad thing for economy no matter what. Crowing out effect affects interest rates. This really isn't relevant here. In this scenrio the ressources are avaiable to both. If ressources only are avaiable to government, then you need to explain why that would be the case. Let's make it clear. When the state invest money, it create a crowding effect that makes it less efficient in theory than private investment. It's valid. But as I said, the rest of what you said is just false, because public investment is made exactly because the private sector does not have the ressource or will not invest in the sector in question. Not to mention your equation can be used the exact same way to say that the private sector is destroying wealth - do you have any proof that the private sector is more efficient in producing anything than the public sector ? Im not really talking about the crowding out effect here. There is only 2 options on how to use these limited ressources: 1) Either government uses them. 2) Or private sector uses them. (So if you could imagine you could first give these ressources to government. Then after they had used those ressources they would have created X wealth (in absolute terms). Then you would go back in time and instead give the ressources to the private sector, and they would create Y Wealth (aboolute)). X - Y = Real wealth creted/desroyed by government. So it should be obivious that in the above example the ressources are avaiable to both, and that X - Y = Real wealth created (I hope we agree on that part). The questions is of course whether the private sector would be using those ressoruces better than government. I think you agree with that when the economy is doing well (high demand from consumers). Private companies will be using these ressources better than government (because if they don't use them well they lose money per se) (?) But I also suspect you would think that when the economy isn't doing well (barely any demand at the current level of prices), then private companies aren't using those ressources. They are just idle, and hence (at least short-termish) government could be creating wealth by using those ressources? Do you agree with the above? EDIT: Sorry for multiple posts in a row. Really need a multiple quote function. I understand your point but it's flawed. 1) There are no proof the private sector is more efficient than the public sector no matter what. 2) When a state invest in something, it is done because the private doesn't have the will to invest or the capacity to do so - train, economical crisis, negativ anticipations, etc. So all in all, your calcul is worthless. 3) Of course the money could be used better, we could even guess than the money can always be used better even in the private sector. Do we still consider than half the investment made are bad or destroy wealth just because they are not the most efficient possible ? No, when someone create wealth, the idea is just that he gain more than he have invested, period. Then math you linked is not used to measure "how much wealth is destroyed", but "how efficient the investment were". Or, to say it in another way, the wealth is not "destroyed" because it was never "created" in the first place. On February 11 2012 03:43 Hider wrote:On February 11 2012 01:06 paralleluniverse wrote:On February 11 2012 00:49 Hider wrote:On February 11 2012 00:39 paralleluniverse wrote:On February 11 2012 00:05 Hider wrote:On February 10 2012 21:37 paralleluniverse wrote:On February 09 2012 23:21 Hider wrote:On February 09 2012 09:51 Sub40APM wrote:
[quote]No they dont. Keynes, and Keynesians are pretty clear that one way out of a crisis is to wait long enough for a deflationary depression to be so severe that prices are in fact reset eventually. What Keynesians are about is avoiding those 5-10 years of defletionary depression and an economic trend where "new" full employment is higher than the previous trend line.
Your right sorry. I misrepresented your view. But something I don't get is, why 5-10 years? Do keynesians have any empircal proof that it takes that long with laizzes-faire politics (and no great depression was no laizzes-faire). Your faith in Laissez-faire has reached levels surpassing religious fundamentalism. http://en.wikipedia.org/wiki/Stiglitz#Information_asymmetry Your posts usually has a higher quality. This is pretty dissapointing. 1) No reason to shit on other people with a different opinion than you. 2) Stiglitz doesn't have any empirical evidence on laizzes faire politics after an economic crisis? I would suspect that in order to analyze that, you would have to study the crisis of the early 20th century and 19th century Some years ago I myself read about some of these crisis, and they were supporting my hypothesis, but of course, i could be biased, so I asked you if you had any other empirical studies (and you respond with an irrelevant link). 3) I suspect you wanted to disproof free markets with the following quote: "Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well". This is basic economics. Of course its a problem. But if you read (and understood) my prev. posts, then you would have realized that the problem was lack of well defined property rights (if rights are well defined, then you can sue people for violating your rights). A bit hypocritical for an Austrian to be asking for empirical evidence. The world is full of examples of information asymmetry, e.g. health insurance, selling financial derivatives, etc. Stieglitz won a Nobel Prize for showing that free markets are always inefficient because of information asymmetry, which is why regulation is needed to correct for it. Putting your faith in free markets is foolish, the idea is fundamentally flawed because of information asymmetry. In fact, a quick google search turns up several articles showing the cause of the financial crisis boils down to information asymmetry: + Show Spoiler +This has now deviated off the topic of this thread. 1) I didn't ask for empircal evidence. I asked for empircal studies. Thats not being a hyprocit. People (like you i believe) has constantly claimed how the austrian school has been prooved wrong by history - By what studies I ask? Then I receive no answer. 2) Thats not free markets. Free markets = well defined property rights. Why aren'y you responding to what I have (now said) twice in this debate? 3) We already had this discussion previously. Health care sector = NOt even close to "free". Private sector = Not even close to free. I argued for that in the rep. thread, but (apparently) you didn't understand the implicaitons of it, and why financial instruments don't need government regulations. But I feel like I am wasting too much time repeating my self again and again. If you want to have a serious discussion then try to understand the austrian school and what free market implies (by actually reading my posts or doing other kind of research). So unless you show me that you actually understand the Austrian business cycle theory, but just do not understand why financial instruments isn't gonna be a problem (in a free market), then I will gladly explain it. Your argument is ridiculous. 1. To fix the crisis let's implement Austrian policies, like cutting government spending. 2, Then your policies inevitably fails, increases unemployment, reduces growth, perpetuates human misery, etc. 3. Now blame the failure of your policies on it not being a free market in the first place. Very helpful. Keynesian logic: 1. Too much spending in a country? NP. Keynesians know a easy way out: Spend more! 2. Wait for employment to rise. 3: The rise in employment unfortunately doesn't seem to be constant 4. Argue that governements didn't spend enough. 5. Argue that governments that interfered in basicially every way in the economy (and fails) prooves that austrian school has been empirical rejected. Please stop with these kind of arguments. They go nowhere. From your post I realize that you still don't get the austrian school. Your are allowed to have your opinion, but why do you feel obligated to criticize something you don't understand? Regarding Stiglitz. His analysis is based on asumptions that doesn't make sense. (LIke he argues that private actors try to maximize, yet they don't take externatilities into account + Governemnt has godlike knowledge). Anyway you can read more about why free markets actually can exist and work: http://mises.org/daily/2301Here is a quote: Logically, within the model's confines, the government is either a creature of the other economic actors (households and firms) or it is not. If it is an institution created and run by the household and firm sectors to rationalize externalities, then (assuming that it can and will do this and that it is the optimal means of doing this), we actually are not dealing with government at all in the usual sense of the word. We are dealing with a voluntary means of negotiating exchanges, a kind of a market, and we are not dealing with coerced taxes. No, it's not the keynesian model at all man. The keynesian model is all based around the idea of contra-cyclic investment. The state is not a big machine made for investment AT ALL for Keynes. The idea is that you have to invest when the private sector cannot because of its anticipation, to help the economy go on despite the crisis. But, during economical growth, from a pure keynesianist perspective, you should not invest and you will eventually get all your investment back through taxes - taxes that will be higher by themselves just because of the economical growth. The idea around unemployment is also way more complex. The idea is that there is no market for labor as the classical think and that a government can decide between inflation and unemployment (phillips). In my country "austrian school" does not exist anymore and is completly outdated. It seems like you are neglecting Keynes, but also neglecting the marginalist who were actually way more subtile and complicated than just "the state is always bad, blablabla". To your first part: Reg. private sector more efficient:Then you need to respond to the problem of not having prices to estimate demand, which was my basic argument for why capitalism is more efficient than communism. You can find it a few pages back. You didn't understand my calcus. Because it exactly take into account if ressources are idle, and there is no will for the private sector to use them. I even wrote that in the post. My formula doesn't imply that government destroys value: If ressources are idle then it would go like this: Government created (aboslute wealth) = 10 Private created (absolute wealth) = 0 Government real wealth created = 10 - 0 = 10 Which is a scenario you could agree on right? And no, you confuse accounting definition of wealth creation with how an economist thinks.
This is how an economist thinks:
http://en.wikipedia.org/wiki/Economic_Value_AddedAn accountest would only look at ROIC (ignore WACC). Well that is keynesian logic to some extent. Keynesians don't care about the cause of the crisis when they want to cure it. Its jsut spend more. Sure they might argue that govnerments shouldn't spend that much during good time, but this isn't really affecting their post-bobble decision making. Austirans are different, they will argue that during the bobble prices got to high and now they have to fail, and hence increased spending can't increase aggreagate number short-term, but those aggregate numbers aren't sustainable (as prices are sitll too high). But really I just argued like that, because its the same way Parallel argued (agianst austrians), because I wanted to illustrate how useless that kind of argumentation was. In sovjet im sure they trought capitalism was outddated. So the popularity of an economic school isn't relevant when discussing who is right.
No, this is not wealth, it is economic value added. Different.
From wikipedia in the wealth entry :
In economics, wealth in a commonly applied accounting sense is the net worth of a person, household, or nation, that is, the value of all assets owned net of all liabilities owed at a point in time
So creating wealth is just when the net worth of a person household, or nation, is going up. Don't change the definition in order to make it seems like you are right.
I don't care about economic value added, this is something else entirely.
Economic profit in contemporary neoclassical economics should be differentiated from that of the previously dominant school of classical economics and Marxian economics, which defined profit as the return to the employer of capital stock (such as machinery, factories, and ploughs) in any productive pursuit involving labor.
The idea behind economic value added is that it can be used for strategic purpose within any company. But it's not at all what we are talking about here : it's a question of efficiency and not of wealth created - we were talking about the classical definition of wealth created if you want.
To say it in another way, if the state create 10 but the private sector would have created 12 with the same investment, then the state did not destroyed 2 unity of wealth, but failed to create 2 unity - they have a bad efficiency, but still created 10.
Also you are wrong about keynes, but I suppose you never read him anyway. Keynes does care about the cause of the crisis, in fact he is even giving a reason for why the crisis is happening in the first time as I said in my first post - even if one can criticize him by showing how crisis do not always happen for the same exact reasons.
Austrian is outdated because it doesn't mean anything in the current world : Hayek or menger's theory have either been proved wrong or being accepted by everybody or almost everybody. The only thing that still cut the economical field is the opposition between the people who think the state should never act within the economy (the austrians) and the rest.
The soviet never thought capitalism was outdated, they thought it was flawed. They were right, human creations are always flawed.
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On February 12 2012 02:51 Schnullerbacke13 wrote:Show nested quote +On February 12 2012 00:56 Hider wrote:On February 12 2012 00:42 Gaga wrote:the bank will ofc not give you a positive interest rate if you just put it onto a check account at a bank. but probably they would charge a little less if you wouldnt out it into the bank. and thats the idea ... in a picture its german but i guess u can get the idea. from top to bottom the translation of the steps is : long term assets short term assets checking accounts cash Yes? And those deposits get loaned out to investors who make positive NPV investments. Not malinvesments as we see today (since they get the capital from printed money rather than saved money. Saved money can be used to buy future consumption goods). This is so stuped as i stated before in this thread. As you can see from the image, the interest rate origin is moved downwards. Inflation does exactly the same, that's why central banks like to have some 2-3% of inflation. So an investment with say 1,5% interest rate actually loses value over time. If inflation raises (e.g. by printing money) capital is forced into investment. No need to reinvent the monetary system in order to achieve this.
Why do people like you has to say someone is stupid, when they dont understand what the other part is talking about?
What you just wrote has nothing to do with I wrote. You should ask questions instead of shit on people when your ignorant.
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On February 12 2012 06:16 WhiteDog wrote:Show nested quote +On February 12 2012 00:23 Hider wrote:On February 11 2012 23:41 WhiteDog wrote:On February 11 2012 03:58 Hider wrote:On February 11 2012 00:50 WhiteDog wrote:On February 11 2012 00:31 Hider wrote:On February 11 2012 00:19 WhiteDog wrote:On February 10 2012 23:55 SilentchiLL wrote:On February 10 2012 23:37 WhiteDog wrote:On February 10 2012 23:18 Velr wrote:[quote] In theorie that can work. In Greece it obviously didn't . Of course it didn't work in a free market environment (the EU zone). The money that the government gave to the government emloyee was most likely used to buy german, english or french goods and not greek goods... So you'd want to fall back to the times when mercantilism was in? Not at all. There are two solution : either the europe decide to give themselves some kind of economic policy in order to help the weakest link of the euro zone to create themselves comparativ advantages, or you permit some country to temporarily get out of the free zone to create those advantages (it is the idea, described by Mill, of the industry at birth). On February 11 2012 00:13 Hider wrote:On February 10 2012 23:18 WhiteDog wrote:On February 10 2012 23:07 Ryuhou)aS( wrote:
I've heard the Greece's government employs some number over 50% of the greek people. I was just wondering, how nobody else noticed that taxes of the minority (in this case Greek citizens NOT employed by the government) pay the paychecks of the majority. ..It just doesn't make any sense, the constant and neverending build up of government, and I think it's probably what had the most to do with the Greek economy crashing. Maybe the government employs can create wealth and because of that pay their own salary ? Also, the salary given to the government employee is actually used by them for consumption - so they create a demand and because of that permit the private sector to exist. If you discount "production created" with oppurtunity cost, then government is destroying wealth. The formula could look like this: You have a scare amount of ressources (consiting of labour and commodities). Either the government owns these ressources or the private sector does. You can't have both. Wealth created = The value of the government transformation (=from ressources to final product) proces (of these ressources) - The value of the private sector transformation proces (given they had the ability to use those ressources). This btw is a completely standard way of measuring wealth creation as an economist (thinking in terms of opp. costs.). (Its not just austrians who defines wealth creation in this way.) What you are describing is the eviction effect (crowding out in english I think). Since the eviction effect is not total (or you are a monetarian and this discussion is just ridiculous) then the government is creating wealth. The whole idea of the public policies is that the private sector does not have the ressource to create any wealth. Not to mention the state is one of the only economical agent that can endebt itself that much. They create less than the private sector, but they create wealth. There is no discussion about that. I suggest you accept that the economy is not as simple as you would like to. I'm sure you would be really interesting if you were not trying to make us believe that the state is always a bad thing for economy no matter what. Crowing out effect affects interest rates. This really isn't relevant here. In this scenrio the ressources are avaiable to both. If ressources only are avaiable to government, then you need to explain why that would be the case. Let's make it clear. When the state invest money, it create a crowding effect that makes it less efficient in theory than private investment. It's valid. But as I said, the rest of what you said is just false, because public investment is made exactly because the private sector does not have the ressource or will not invest in the sector in question. Not to mention your equation can be used the exact same way to say that the private sector is destroying wealth - do you have any proof that the private sector is more efficient in producing anything than the public sector ? Im not really talking about the crowding out effect here. There is only 2 options on how to use these limited ressources: 1) Either government uses them. 2) Or private sector uses them. (So if you could imagine you could first give these ressources to government. Then after they had used those ressources they would have created X wealth (in absolute terms). Then you would go back in time and instead give the ressources to the private sector, and they would create Y Wealth (aboolute)). X - Y = Real wealth creted/desroyed by government. So it should be obivious that in the above example the ressources are avaiable to both, and that X - Y = Real wealth created (I hope we agree on that part). The questions is of course whether the private sector would be using those ressoruces better than government. I think you agree with that when the economy is doing well (high demand from consumers). Private companies will be using these ressources better than government (because if they don't use them well they lose money per se) (?) But I also suspect you would think that when the economy isn't doing well (barely any demand at the current level of prices), then private companies aren't using those ressources. They are just idle, and hence (at least short-termish) government could be creating wealth by using those ressources? Do you agree with the above? EDIT: Sorry for multiple posts in a row. Really need a multiple quote function. I understand your point but it's flawed. 1) There are no proof the private sector is more efficient than the public sector no matter what. 2) When a state invest in something, it is done because the private doesn't have the will to invest or the capacity to do so - train, economical crisis, negativ anticipations, etc. So all in all, your calcul is worthless. 3) Of course the money could be used better, we could even guess than the money can always be used better even in the private sector. Do we still consider than half the investment made are bad or destroy wealth just because they are not the most efficient possible ? No, when someone create wealth, the idea is just that he gain more than he have invested, period. Then math you linked is not used to measure "how much wealth is destroyed", but "how efficient the investment were". Or, to say it in another way, the wealth is not "destroyed" because it was never "created" in the first place. On February 11 2012 03:43 Hider wrote:On February 11 2012 01:06 paralleluniverse wrote:On February 11 2012 00:49 Hider wrote:On February 11 2012 00:39 paralleluniverse wrote:On February 11 2012 00:05 Hider wrote:On February 10 2012 21:37 paralleluniverse wrote:On February 09 2012 23:21 Hider wrote:
[quote]
Your right sorry. I misrepresented your view. But something I don't get is, why 5-10 years? Do keynesians have any empircal proof that it takes that long with laizzes-faire politics (and no great depression was no laizzes-faire).
Your faith in Laissez-faire has reached levels surpassing religious fundamentalism. http://en.wikipedia.org/wiki/Stiglitz#Information_asymmetry Your posts usually has a higher quality. This is pretty dissapointing. 1) No reason to shit on other people with a different opinion than you. 2) Stiglitz doesn't have any empirical evidence on laizzes faire politics after an economic crisis? I would suspect that in order to analyze that, you would have to study the crisis of the early 20th century and 19th century Some years ago I myself read about some of these crisis, and they were supporting my hypothesis, but of course, i could be biased, so I asked you if you had any other empirical studies (and you respond with an irrelevant link). 3) I suspect you wanted to disproof free markets with the following quote: "Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well". This is basic economics. Of course its a problem. But if you read (and understood) my prev. posts, then you would have realized that the problem was lack of well defined property rights (if rights are well defined, then you can sue people for violating your rights). A bit hypocritical for an Austrian to be asking for empirical evidence. The world is full of examples of information asymmetry, e.g. health insurance, selling financial derivatives, etc. Stieglitz won a Nobel Prize for showing that free markets are always inefficient because of information asymmetry, which is why regulation is needed to correct for it. Putting your faith in free markets is foolish, the idea is fundamentally flawed because of information asymmetry. In fact, a quick google search turns up several articles showing the cause of the financial crisis boils down to information asymmetry: + Show Spoiler +This has now deviated off the topic of this thread. 1) I didn't ask for empircal evidence. I asked for empircal studies. Thats not being a hyprocit. People (like you i believe) has constantly claimed how the austrian school has been prooved wrong by history - By what studies I ask? Then I receive no answer. 2) Thats not free markets. Free markets = well defined property rights. Why aren'y you responding to what I have (now said) twice in this debate? 3) We already had this discussion previously. Health care sector = NOt even close to "free". Private sector = Not even close to free. I argued for that in the rep. thread, but (apparently) you didn't understand the implicaitons of it, and why financial instruments don't need government regulations. But I feel like I am wasting too much time repeating my self again and again. If you want to have a serious discussion then try to understand the austrian school and what free market implies (by actually reading my posts or doing other kind of research). So unless you show me that you actually understand the Austrian business cycle theory, but just do not understand why financial instruments isn't gonna be a problem (in a free market), then I will gladly explain it. Your argument is ridiculous. 1. To fix the crisis let's implement Austrian policies, like cutting government spending. 2, Then your policies inevitably fails, increases unemployment, reduces growth, perpetuates human misery, etc. 3. Now blame the failure of your policies on it not being a free market in the first place. Very helpful. Keynesian logic: 1. Too much spending in a country? NP. Keynesians know a easy way out: Spend more! 2. Wait for employment to rise. 3: The rise in employment unfortunately doesn't seem to be constant 4. Argue that governements didn't spend enough. 5. Argue that governments that interfered in basicially every way in the economy (and fails) prooves that austrian school has been empirical rejected. Please stop with these kind of arguments. They go nowhere. From your post I realize that you still don't get the austrian school. Your are allowed to have your opinion, but why do you feel obligated to criticize something you don't understand? Regarding Stiglitz. His analysis is based on asumptions that doesn't make sense. (LIke he argues that private actors try to maximize, yet they don't take externatilities into account + Governemnt has godlike knowledge). Anyway you can read more about why free markets actually can exist and work: http://mises.org/daily/2301Here is a quote: Logically, within the model's confines, the government is either a creature of the other economic actors (households and firms) or it is not. If it is an institution created and run by the household and firm sectors to rationalize externalities, then (assuming that it can and will do this and that it is the optimal means of doing this), we actually are not dealing with government at all in the usual sense of the word. We are dealing with a voluntary means of negotiating exchanges, a kind of a market, and we are not dealing with coerced taxes. No, it's not the keynesian model at all man. The keynesian model is all based around the idea of contra-cyclic investment. The state is not a big machine made for investment AT ALL for Keynes. The idea is that you have to invest when the private sector cannot because of its anticipation, to help the economy go on despite the crisis. But, during economical growth, from a pure keynesianist perspective, you should not invest and you will eventually get all your investment back through taxes - taxes that will be higher by themselves just because of the economical growth. The idea around unemployment is also way more complex. The idea is that there is no market for labor as the classical think and that a government can decide between inflation and unemployment (phillips). In my country "austrian school" does not exist anymore and is completly outdated. It seems like you are neglecting Keynes, but also neglecting the marginalist who were actually way more subtile and complicated than just "the state is always bad, blablabla". To your first part: Reg. private sector more efficient:Then you need to respond to the problem of not having prices to estimate demand, which was my basic argument for why capitalism is more efficient than communism. You can find it a few pages back. You didn't understand my calcus. Because it exactly take into account if ressources are idle, and there is no will for the private sector to use them. I even wrote that in the post. My formula doesn't imply that government destroys value: If ressources are idle then it would go like this: Government created (aboslute wealth) = 10 Private created (absolute wealth) = 0 Government real wealth created = 10 - 0 = 10 Which is a scenario you could agree on right? And no, you confuse accounting definition of wealth creation with how an economist thinks.
This is how an economist thinks:
http://en.wikipedia.org/wiki/Economic_Value_AddedAn accountest would only look at ROIC (ignore WACC). Well that is keynesian logic to some extent. Keynesians don't care about the cause of the crisis when they want to cure it. Its jsut spend more. Sure they might argue that govnerments shouldn't spend that much during good time, but this isn't really affecting their post-bobble decision making. Austirans are different, they will argue that during the bobble prices got to high and now they have to fail, and hence increased spending can't increase aggreagate number short-term, but those aggregate numbers aren't sustainable (as prices are sitll too high). But really I just argued like that, because its the same way Parallel argued (agianst austrians), because I wanted to illustrate how useless that kind of argumentation was. In sovjet im sure they trought capitalism was outddated. So the popularity of an economic school isn't relevant when discussing who is right. No, this is not wealth, it is economic value added. Different. From wikipedia in the wealth entry : Show nested quote +In economics, wealth in a commonly applied accounting sense is the net worth of a person, household, or nation, that is, the value of all assets owned net of all liabilities owed at a point in time So creating wealth is just when the net worth of a person household, or nation, is going up. Don't change the definition in order to make it seems like you are right. I don't care about economic value added, this is something else entirely. Show nested quote +Economic profit in contemporary neoclassical economics should be differentiated from that of the previously dominant school of classical economics and Marxian economics, which defined profit as the return to the employer of capital stock (such as machinery, factories, and ploughs) in any productive pursuit involving labor. The idea behind economic value added is that it can be used for strategic purpose within any company. But it's not at all what we are talking about here : it's a question of efficiency and not of wealth created - we were talking about the classical definition of wealth created if you want. To say it in another way, if the state create 10 but the private sector would have created 12 with the same investment, then the state did not destroyed 2 unity of wealth, but failed to create 2 unity - they have a bad efficiency, but still created 10. Also you are wrong about keynes, but I suppose you never read him anyway. Keynes does care about the cause of the crisis, in fact he is even giving a reason for why the crisis is happening in the first time as I said in my first post - even if one can criticize him by showing how crisis do not always happen for the same exact reasons. Austrian is outdated because it doesn't mean anything in the current world : Hayek or menger's theory have either been proved wrong or being accepted by everybody or almost everybody. The only thing that still cut the economical field is the opposition between the people who think the state should never act within the economy (the austrians) and the rest. The soviet never thought capitalism was outdated, they thought it was flawed. They were right, human creations are always flawed.
When economists talks about profitable investmentments, they talk about EVA. EVA is a way to measure wealth creation, It makes no sense for an economist to say that wealth if the NPV value is negative. When wikipedia goes with that definition its most likely because they talk about wealht creation in a different context. In this context it makes no sense to no not use a oppu. cost related definition of wealth creation (because we want to discuss what is best - government or private sector). But anyway its a quesiton of definition - so lets stop with this discussion.
I never said Keynes didn't care about the cause (if i did it should be seen in the context). I said he didn't take it into account. It didn't really matter. The solution is still increased aggregate spending no matter what.
Of course austrians hasn't been disproved. And this is a pointless discussion. Just because a current economic theory is popular doesn't make it correct. And if it in fact has been disproved (according to you) then you need to argue why.
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On February 12 2012 07:39 Hider wrote:Show nested quote +On February 12 2012 02:51 Schnullerbacke13 wrote:On February 12 2012 00:56 Hider wrote:On February 12 2012 00:42 Gaga wrote:the bank will ofc not give you a positive interest rate if you just put it onto a check account at a bank. but probably they would charge a little less if you wouldnt out it into the bank. and thats the idea ... in a picture its german but i guess u can get the idea. from top to bottom the translation of the steps is : long term assets short term assets checking accounts cash Yes? And those deposits get loaned out to investors who make positive NPV investments. Not malinvesments as we see today (since they get the capital from printed money rather than saved money. Saved money can be used to buy future consumption goods). This is so stuped as i stated before in this thread. As you can see from the image, the interest rate origin is moved downwards. Inflation does exactly the same, that's why central banks like to have some 2-3% of inflation. So an investment with say 1,5% interest rate actually loses value over time. If inflation raises (e.g. by printing money) capital is forced into investment. No need to reinvent the monetary system in order to achieve this. Why do people like you has to say someone is stupid, when they dont understand what the other part is talking about? What you just wrote has nothing to do with I wrote. You should ask questions instead of shit on people when your ignorant.
srry, i thought on a quick look the thread is still stuck with the "freigeld" idea of gesell ..
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On February 12 2012 07:46 Hider wrote:Show nested quote +On February 12 2012 06:16 WhiteDog wrote:On February 12 2012 00:23 Hider wrote:On February 11 2012 23:41 WhiteDog wrote:On February 11 2012 03:58 Hider wrote:On February 11 2012 00:50 WhiteDog wrote:On February 11 2012 00:31 Hider wrote:On February 11 2012 00:19 WhiteDog wrote:On February 10 2012 23:55 SilentchiLL wrote:On February 10 2012 23:37 WhiteDog wrote:
[quote]
Of course it didn't work in a free market environment (the EU zone). The money that the government gave to the government emloyee was most likely used to buy german, english or french goods and not greek goods... So you'd want to fall back to the times when mercantilism was in? Not at all. There are two solution : either the europe decide to give themselves some kind of economic policy in order to help the weakest link of the euro zone to create themselves comparativ advantages, or you permit some country to temporarily get out of the free zone to create those advantages (it is the idea, described by Mill, of the industry at birth). On February 11 2012 00:13 Hider wrote:On February 10 2012 23:18 WhiteDog wrote:
[quote]
Maybe the government employs can create wealth and because of that pay their own salary ?
Also, the salary given to the government employee is actually used by them for consumption - so they create a demand and because of that permit the private sector to exist. If you discount "production created" with oppurtunity cost, then government is destroying wealth. The formula could look like this: You have a scare amount of ressources (consiting of labour and commodities). Either the government owns these ressources or the private sector does. You can't have both. Wealth created = The value of the government transformation (=from ressources to final product) proces (of these ressources) - The value of the private sector transformation proces (given they had the ability to use those ressources). This btw is a completely standard way of measuring wealth creation as an economist (thinking in terms of opp. costs.). (Its not just austrians who defines wealth creation in this way.) What you are describing is the eviction effect (crowding out in english I think). Since the eviction effect is not total (or you are a monetarian and this discussion is just ridiculous) then the government is creating wealth. The whole idea of the public policies is that the private sector does not have the ressource to create any wealth. Not to mention the state is one of the only economical agent that can endebt itself that much. They create less than the private sector, but they create wealth. There is no discussion about that. I suggest you accept that the economy is not as simple as you would like to. I'm sure you would be really interesting if you were not trying to make us believe that the state is always a bad thing for economy no matter what. Crowing out effect affects interest rates. This really isn't relevant here. In this scenrio the ressources are avaiable to both. If ressources only are avaiable to government, then you need to explain why that would be the case. Let's make it clear. When the state invest money, it create a crowding effect that makes it less efficient in theory than private investment. It's valid. But as I said, the rest of what you said is just false, because public investment is made exactly because the private sector does not have the ressource or will not invest in the sector in question. Not to mention your equation can be used the exact same way to say that the private sector is destroying wealth - do you have any proof that the private sector is more efficient in producing anything than the public sector ? Im not really talking about the crowding out effect here. There is only 2 options on how to use these limited ressources: 1) Either government uses them. 2) Or private sector uses them. (So if you could imagine you could first give these ressources to government. Then after they had used those ressources they would have created X wealth (in absolute terms). Then you would go back in time and instead give the ressources to the private sector, and they would create Y Wealth (aboolute)). X - Y = Real wealth creted/desroyed by government. So it should be obivious that in the above example the ressources are avaiable to both, and that X - Y = Real wealth created (I hope we agree on that part). The questions is of course whether the private sector would be using those ressoruces better than government. I think you agree with that when the economy is doing well (high demand from consumers). Private companies will be using these ressources better than government (because if they don't use them well they lose money per se) (?) But I also suspect you would think that when the economy isn't doing well (barely any demand at the current level of prices), then private companies aren't using those ressources. They are just idle, and hence (at least short-termish) government could be creating wealth by using those ressources? Do you agree with the above? EDIT: Sorry for multiple posts in a row. Really need a multiple quote function. I understand your point but it's flawed. 1) There are no proof the private sector is more efficient than the public sector no matter what. 2) When a state invest in something, it is done because the private doesn't have the will to invest or the capacity to do so - train, economical crisis, negativ anticipations, etc. So all in all, your calcul is worthless. 3) Of course the money could be used better, we could even guess than the money can always be used better even in the private sector. Do we still consider than half the investment made are bad or destroy wealth just because they are not the most efficient possible ? No, when someone create wealth, the idea is just that he gain more than he have invested, period. Then math you linked is not used to measure "how much wealth is destroyed", but "how efficient the investment were". Or, to say it in another way, the wealth is not "destroyed" because it was never "created" in the first place. On February 11 2012 03:43 Hider wrote:On February 11 2012 01:06 paralleluniverse wrote:On February 11 2012 00:49 Hider wrote:On February 11 2012 00:39 paralleluniverse wrote:On February 11 2012 00:05 Hider wrote:Your posts usually has a higher quality. This is pretty dissapointing. 1) No reason to shit on other people with a different opinion than you. 2) Stiglitz doesn't have any empirical evidence on laizzes faire politics after an economic crisis? I would suspect that in order to analyze that, you would have to study the crisis of the early 20th century and 19th century Some years ago I myself read about some of these crisis, and they were supporting my hypothesis, but of course, i could be biased, so I asked you if you had any other empirical studies (and you respond with an irrelevant link). 3) I suspect you wanted to disproof free markets with the following quote: "Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well". This is basic economics. Of course its a problem. But if you read (and understood) my prev. posts, then you would have realized that the problem was lack of well defined property rights (if rights are well defined, then you can sue people for violating your rights). A bit hypocritical for an Austrian to be asking for empirical evidence. The world is full of examples of information asymmetry, e.g. health insurance, selling financial derivatives, etc. Stieglitz won a Nobel Prize for showing that free markets are always inefficient because of information asymmetry, which is why regulation is needed to correct for it. Putting your faith in free markets is foolish, the idea is fundamentally flawed because of information asymmetry. In fact, a quick google search turns up several articles showing the cause of the financial crisis boils down to information asymmetry: + Show Spoiler +This has now deviated off the topic of this thread. 1) I didn't ask for empircal evidence. I asked for empircal studies. Thats not being a hyprocit. People (like you i believe) has constantly claimed how the austrian school has been prooved wrong by history - By what studies I ask? Then I receive no answer. 2) Thats not free markets. Free markets = well defined property rights. Why aren'y you responding to what I have (now said) twice in this debate? 3) We already had this discussion previously. Health care sector = NOt even close to "free". Private sector = Not even close to free. I argued for that in the rep. thread, but (apparently) you didn't understand the implicaitons of it, and why financial instruments don't need government regulations. But I feel like I am wasting too much time repeating my self again and again. If you want to have a serious discussion then try to understand the austrian school and what free market implies (by actually reading my posts or doing other kind of research). So unless you show me that you actually understand the Austrian business cycle theory, but just do not understand why financial instruments isn't gonna be a problem (in a free market), then I will gladly explain it. Your argument is ridiculous. 1. To fix the crisis let's implement Austrian policies, like cutting government spending. 2, Then your policies inevitably fails, increases unemployment, reduces growth, perpetuates human misery, etc. 3. Now blame the failure of your policies on it not being a free market in the first place. Very helpful. Keynesian logic: 1. Too much spending in a country? NP. Keynesians know a easy way out: Spend more! 2. Wait for employment to rise. 3: The rise in employment unfortunately doesn't seem to be constant 4. Argue that governements didn't spend enough. 5. Argue that governments that interfered in basicially every way in the economy (and fails) prooves that austrian school has been empirical rejected. Please stop with these kind of arguments. They go nowhere. From your post I realize that you still don't get the austrian school. Your are allowed to have your opinion, but why do you feel obligated to criticize something you don't understand? Regarding Stiglitz. His analysis is based on asumptions that doesn't make sense. (LIke he argues that private actors try to maximize, yet they don't take externatilities into account + Governemnt has godlike knowledge). Anyway you can read more about why free markets actually can exist and work: http://mises.org/daily/2301Here is a quote: Logically, within the model's confines, the government is either a creature of the other economic actors (households and firms) or it is not. If it is an institution created and run by the household and firm sectors to rationalize externalities, then (assuming that it can and will do this and that it is the optimal means of doing this), we actually are not dealing with government at all in the usual sense of the word. We are dealing with a voluntary means of negotiating exchanges, a kind of a market, and we are not dealing with coerced taxes. No, it's not the keynesian model at all man. The keynesian model is all based around the idea of contra-cyclic investment. The state is not a big machine made for investment AT ALL for Keynes. The idea is that you have to invest when the private sector cannot because of its anticipation, to help the economy go on despite the crisis. But, during economical growth, from a pure keynesianist perspective, you should not invest and you will eventually get all your investment back through taxes - taxes that will be higher by themselves just because of the economical growth. The idea around unemployment is also way more complex. The idea is that there is no market for labor as the classical think and that a government can decide between inflation and unemployment (phillips). In my country "austrian school" does not exist anymore and is completly outdated. It seems like you are neglecting Keynes, but also neglecting the marginalist who were actually way more subtile and complicated than just "the state is always bad, blablabla". To your first part: Reg. private sector more efficient:Then you need to respond to the problem of not having prices to estimate demand, which was my basic argument for why capitalism is more efficient than communism. You can find it a few pages back. You didn't understand my calcus. Because it exactly take into account if ressources are idle, and there is no will for the private sector to use them. I even wrote that in the post. My formula doesn't imply that government destroys value: If ressources are idle then it would go like this: Government created (aboslute wealth) = 10 Private created (absolute wealth) = 0 Government real wealth created = 10 - 0 = 10 Which is a scenario you could agree on right? And no, you confuse accounting definition of wealth creation with how an economist thinks.
This is how an economist thinks:
http://en.wikipedia.org/wiki/Economic_Value_AddedAn accountest would only look at ROIC (ignore WACC). Well that is keynesian logic to some extent. Keynesians don't care about the cause of the crisis when they want to cure it. Its jsut spend more. Sure they might argue that govnerments shouldn't spend that much during good time, but this isn't really affecting their post-bobble decision making. Austirans are different, they will argue that during the bobble prices got to high and now they have to fail, and hence increased spending can't increase aggreagate number short-term, but those aggregate numbers aren't sustainable (as prices are sitll too high). But really I just argued like that, because its the same way Parallel argued (agianst austrians), because I wanted to illustrate how useless that kind of argumentation was. In sovjet im sure they trought capitalism was outddated. So the popularity of an economic school isn't relevant when discussing who is right. No, this is not wealth, it is economic value added. Different. From wikipedia in the wealth entry : In economics, wealth in a commonly applied accounting sense is the net worth of a person, household, or nation, that is, the value of all assets owned net of all liabilities owed at a point in time So creating wealth is just when the net worth of a person household, or nation, is going up. Don't change the definition in order to make it seems like you are right. I don't care about economic value added, this is something else entirely. Economic profit in contemporary neoclassical economics should be differentiated from that of the previously dominant school of classical economics and Marxian economics, which defined profit as the return to the employer of capital stock (such as machinery, factories, and ploughs) in any productive pursuit involving labor. The idea behind economic value added is that it can be used for strategic purpose within any company. But it's not at all what we are talking about here : it's a question of efficiency and not of wealth created - we were talking about the classical definition of wealth created if you want. To say it in another way, if the state create 10 but the private sector would have created 12 with the same investment, then the state did not destroyed 2 unity of wealth, but failed to create 2 unity - they have a bad efficiency, but still created 10. Also you are wrong about keynes, but I suppose you never read him anyway. Keynes does care about the cause of the crisis, in fact he is even giving a reason for why the crisis is happening in the first time as I said in my first post - even if one can criticize him by showing how crisis do not always happen for the same exact reasons. Austrian is outdated because it doesn't mean anything in the current world : Hayek or menger's theory have either been proved wrong or being accepted by everybody or almost everybody. The only thing that still cut the economical field is the opposition between the people who think the state should never act within the economy (the austrians) and the rest. The soviet never thought capitalism was outdated, they thought it was flawed. They were right, human creations are always flawed. When economists talks about profitable investmentments, they talk about EVA. EVA is a way to measure wealth creation, It makes no sense for an economist to say that wealth if the NPV value is negative. When wikipedia goes with that definition its most likely because they talk about wealht creation in a different context. In this context it makes no sense to no not use a oppu. cost related definition of wealth creation (because we want to discuss what is best - government or private sector). But anyway its a quesiton of definition - so lets stop with this discussion. I never said Keynes didn't care about the cause (if i did it should be seen in the context). I said he didn't take it into account. It didn't really matter. The solution is still increased aggregate spending no matter what. Of course austrians hasn't been disproved. And this is a pointless discussion. Just because a current economic theory is popular doesn't make it correct. And if it in fact has been disproved (according to you) then you need to argue why.
Yes when an economist talk about PROFITABLE INVESTMENTS, they talk about EVA. EVA is not a measure of wealth creation in the usual sense, it is a measure of wealth creation if you consider the neo classical definition of it only - not if you consider the classical or the usual definition of "wealth creation". Economist use EVA for profitable investments because it's the best way to define the efficiency of any investment - you compare the wealth created by one investment to what it could have created in another case.
But you were saying that the public sector was "destroying wealth". Using EVA to argue that the state is destroying wealth is wrong. You use EVA to show that the investment made by the state is not the most efficient possible, not that it is destroying wealth.
Austrian economy hasn't been disproved, it's like god : it has never been proved in the first place but people still argue that it should be "disproved".
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On February 09 2012 19:54 paralleluniverse wrote:Show nested quote +On February 09 2012 19:44 ETisME wrote:On February 09 2012 18:42 paralleluniverse wrote:On February 09 2012 18:31 ETisME wrote:+ Show Spoiler +
Can anyone give me some big updates on the EU zone? I rarely read anything about it because it just isn't there on newspaper very much anymore.
Plus, I would actually prefer to listen to some locals' comments rather than some figures and the experts' "analysis".
As an undergraduate, I would totally say that empirical data, graphics, historical comparison usually don't really predict the consequences correctly at all.
They only really help in explaining what happened and economists can only try to fit a model and build a hypothesis around what might happen if they do this/that.
So you would rely on gut feeling instead of objective analysis?
A little thought:
EU and USA are like those old daddy billionaires. They were once very productive and grew rich, but USA didn't learn how to save what it has, spending on luxury goods and keep burrowing just to be able to live rich.
While EU is trying to include more kids into his family, even some who are shady and have a very different culture background and EU has to spent money trying to hold everyone together by controlling how much money each of them can get. When one was caught cheating and had to be saved, other cried unfair and wants some of those extra cash.
... http://www.bbc.co.uk/news/business-16301630http://www.bbc.co.uk/news/business-13798000 no, not gut feelings. But there are a lot of factors that only the locals can truly feel and provide. Economies don't really solely dependant upon government's policy and decisions, it's what the people react to it that really matters. It's a great way to feel how people react to their policy, how they think what should have been done, how big the disappointment/pleased by the policy. An example would be that Japan lowering their interest rate, hoping people would spent and invest to stimulate the economy but no one did that. It's a matter on how to approach the topic to be honest. Finance is similar, some people prefer buying stocks with graphs and numerical data, but some treat it as a business and study more than just numbers, including how people see the brands etc. Data can be biased and usually very hard to obtain an accurate one since there are tonnes of sampling methods etc. There will always be opposing theories, different theories attempting to explain the same effect etc. It's no wonder that a monkey can out-perform some professional investors I really dislike people treating economics with too much of mathematics and theories, just lacks that human side of it. It's like a game company trying to design the perfect fps games but didn't notice their target market doesn't really play any fps Economists are not mindless automatons who are disconnected from reality and can understand nothing but data. Analyzing something as complex as an entire economy with nothing but your subjective, narrow and confirmation biased view of the world is foolish. You act as if data cannot capture the effect of interest rate cuts on private investment. As a prime example of the folly of this approach, your statement on the European debt crisis is nonsense.
the very basic assumption of Economics is wrong. It assumes humans act rationally.
Analysing the economy does require to take in account of how people might react, especially their expectations.
Economics is a social science, but too many people take it as a science.
which comes to the recent rise of behavior economics and neuroeconomics, both of which tries to capture the human decision making more closely.
Data can capture effects, sure. But there are tonnes of limitation and there are lots of methods trying to solve it.
If you have done econometrics, you would know how much of the datas you are seeing are actually just collected and simplified to "factor A caused result A", omitting tonnes of other factors. And whether to omit those other factors sometimes can depends on the person who is doing the data analysis. Also, not to mention there are data that are not able to be quantified.
Another example is the financial crisis, some economists knew there was a bubble in housing market but they didn't see it as huge as it was because they couldn't see how dangerous the repo market was when everything was repackaged and sold as a "better looking" product.
If you think I am the only one to think this way, go read:
http://www.ifw-members.ifw-kiel.de/publications/the-financial-crisis-and-the-systemic-failure-of-academic-economics/KWP_1489_ColanderetalFinancial Crisis.pdf
Or go to the "control illusion" part of this website
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2234
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On February 12 2012 19:06 ETisME wrote:Show nested quote +On February 09 2012 19:54 paralleluniverse wrote:On February 09 2012 19:44 ETisME wrote:On February 09 2012 18:42 paralleluniverse wrote:On February 09 2012 18:31 ETisME wrote:+ Show Spoiler +
Can anyone give me some big updates on the EU zone? I rarely read anything about it because it just isn't there on newspaper very much anymore.
Plus, I would actually prefer to listen to some locals' comments rather than some figures and the experts' "analysis".
As an undergraduate, I would totally say that empirical data, graphics, historical comparison usually don't really predict the consequences correctly at all.
They only really help in explaining what happened and economists can only try to fit a model and build a hypothesis around what might happen if they do this/that.
So you would rely on gut feeling instead of objective analysis?
A little thought:
EU and USA are like those old daddy billionaires. They were once very productive and grew rich, but USA didn't learn how to save what it has, spending on luxury goods and keep burrowing just to be able to live rich.
While EU is trying to include more kids into his family, even some who are shady and have a very different culture background and EU has to spent money trying to hold everyone together by controlling how much money each of them can get. When one was caught cheating and had to be saved, other cried unfair and wants some of those extra cash.
... http://www.bbc.co.uk/news/business-16301630http://www.bbc.co.uk/news/business-13798000 no, not gut feelings. But there are a lot of factors that only the locals can truly feel and provide. Economies don't really solely dependant upon government's policy and decisions, it's what the people react to it that really matters. It's a great way to feel how people react to their policy, how they think what should have been done, how big the disappointment/pleased by the policy. An example would be that Japan lowering their interest rate, hoping people would spent and invest to stimulate the economy but no one did that. It's a matter on how to approach the topic to be honest. Finance is similar, some people prefer buying stocks with graphs and numerical data, but some treat it as a business and study more than just numbers, including how people see the brands etc. Data can be biased and usually very hard to obtain an accurate one since there are tonnes of sampling methods etc. There will always be opposing theories, different theories attempting to explain the same effect etc. It's no wonder that a monkey can out-perform some professional investors I really dislike people treating economics with too much of mathematics and theories, just lacks that human side of it. It's like a game company trying to design the perfect fps games but didn't notice their target market doesn't really play any fps Economists are not mindless automatons who are disconnected from reality and can understand nothing but data. Analyzing something as complex as an entire economy with nothing but your subjective, narrow and confirmation biased view of the world is foolish. You act as if data cannot capture the effect of interest rate cuts on private investment. As a prime example of the folly of this approach, your statement on the European debt crisis is nonsense. the very basic assumption of Economics is wrong. It assumes humans act rationally. Analysing the economy does require to take in account of how people might react, especially their expectations. Economics is a social science, but too many people take it as a science. which comes to the recent rise of behavior economics and neuroeconomics, both of which tries to capture the human decision making more closely. Data can capture effects, sure. But there are tonnes of limitation and there are lots of methods trying to solve it. If you have done econometrics, you would know how much of the datas you are seeing are actually just collected and simplified to "factor A caused result A", omitting tonnes of other factors. And whether to omit those other factors sometimes can depends on the person who is doing the data analysis. Also, not to mention there are data that are not able to be quantified. Another example is the financial crisis, some economists knew there was a bubble in housing market but they didn't see it as huge as it was because they couldn't see how dangerous the repo market was when everything was repackaged and sold as a "better looking" product. If you think I am the only one to think this way, go read: http://www.ifw-members.ifw-kiel.de/publications/the-financial-crisis-and-the-systemic-failure-of-academic-economics/KWP_1489_ColanderetalFinancial Crisis.pdfOr go to the "control illusion" part of this website http://knowledge.wharton.upenn.edu/article.cfm?articleid=2234
I completly agree with you, but an economist would not because what you are saying is only right for a small proportion of economists. Most think people act rationally (I think this is a mistake) but explain how actions of people is not always optimum through games theory - the information is not perfect, the rationality is limited, etc.
They will still build their models, but argue that they are right only if... It's exactlty what Hider is saying since the beginning of this thread : the austrians are right because 1) you cannot prove them wrong 2) the market is not perfect.
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On February 12 2012 19:06 ETisME wrote:Show nested quote +On February 09 2012 19:54 paralleluniverse wrote:On February 09 2012 19:44 ETisME wrote:On February 09 2012 18:42 paralleluniverse wrote:On February 09 2012 18:31 ETisME wrote:+ Show Spoiler +
Can anyone give me some big updates on the EU zone? I rarely read anything about it because it just isn't there on newspaper very much anymore.
Plus, I would actually prefer to listen to some locals' comments rather than some figures and the experts' "analysis".
As an undergraduate, I would totally say that empirical data, graphics, historical comparison usually don't really predict the consequences correctly at all.
They only really help in explaining what happened and economists can only try to fit a model and build a hypothesis around what might happen if they do this/that.
So you would rely on gut feeling instead of objective analysis?
A little thought:
EU and USA are like those old daddy billionaires. They were once very productive and grew rich, but USA didn't learn how to save what it has, spending on luxury goods and keep burrowing just to be able to live rich.
While EU is trying to include more kids into his family, even some who are shady and have a very different culture background and EU has to spent money trying to hold everyone together by controlling how much money each of them can get. When one was caught cheating and had to be saved, other cried unfair and wants some of those extra cash.
... http://www.bbc.co.uk/news/business-16301630http://www.bbc.co.uk/news/business-13798000 no, not gut feelings. But there are a lot of factors that only the locals can truly feel and provide. Economies don't really solely dependant upon government's policy and decisions, it's what the people react to it that really matters. It's a great way to feel how people react to their policy, how they think what should have been done, how big the disappointment/pleased by the policy. An example would be that Japan lowering their interest rate, hoping people would spent and invest to stimulate the economy but no one did that. It's a matter on how to approach the topic to be honest. Finance is similar, some people prefer buying stocks with graphs and numerical data, but some treat it as a business and study more than just numbers, including how people see the brands etc. Data can be biased and usually very hard to obtain an accurate one since there are tonnes of sampling methods etc. There will always be opposing theories, different theories attempting to explain the same effect etc. It's no wonder that a monkey can out-perform some professional investors I really dislike people treating economics with too much of mathematics and theories, just lacks that human side of it. It's like a game company trying to design the perfect fps games but didn't notice their target market doesn't really play any fps Economists are not mindless automatons who are disconnected from reality and can understand nothing but data. Analyzing something as complex as an entire economy with nothing but your subjective, narrow and confirmation biased view of the world is foolish. You act as if data cannot capture the effect of interest rate cuts on private investment. As a prime example of the folly of this approach, your statement on the European debt crisis is nonsense. the very basic assumption of Economics is wrong. It assumes humans act rationally. Analysing the economy does require to take in account of how people might react, especially their expectations. Economics is a social science, but too many people take it as a science. which comes to the recent rise of behavior economics and neuroeconomics, both of which tries to capture the human decision making more closely. Data can capture effects, sure. But there are tonnes of limitation and there are lots of methods trying to solve it. If you have done econometrics, you would know how much of the datas you are seeing are actually just collected and simplified to "factor A caused result A", omitting tonnes of other factors. And whether to omit those other factors sometimes can depends on the person who is doing the data analysis. Also, not to mention there are data that are not able to be quantified. Another example is the financial crisis, some economists knew there was a bubble in housing market but they didn't see it as huge as it was because they couldn't see how dangerous the repo market was when everything was repackaged and sold as a "better looking" product. If you think I am the only one to think this way, go read: http://www.ifw-members.ifw-kiel.de/publications/the-financial-crisis-and-the-systemic-failure-of-academic-economics/KWP_1489_ColanderetalFinancial Crisis.pdfOr go to the "control illusion" part of this website http://knowledge.wharton.upenn.edu/article.cfm?articleid=2234
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?ref=paulkrugman
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Zurich15329 Posts
Yo guys. I appreciate the civil debate, but: This thread is about The European Debt Crisis and the Euro.
It is not yet another economic fundamentals discussion. Please stay on topic.
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Rating agency Moody's said on Monday it downgraded its credit outlooks on the triple-A ratings of France, the United Kingdom and Austria to negative, and it cut the ratings of Italy, Portugal, Spain, Slovakia, Slovenia and Malta.
The rating agency said it was making the changes "in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis."
The rating outlook of the nine countries was set to negative "given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness," Moody's said in a statement.
The move follows a similar one by Standard & Poor's last month, when France and Austria lost their triple-A status while Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia were downgraded.
After the outlook for its rating was cut, Britain said it must keep its promise to slash its large budget deficit.
Source
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You can also state that the only reason why they want to help us in the first place is that Europe will get back to consuming their production of high quality products (electronics eg). This is because the Chinese market does not suffice to fill the gap created by the economic downturn in Europe.
With other words, they want/need us to get better so they can keep developing at the high rate they are doing now.
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from http://globaleconomicanalysis.blogspot.com/
Time For Some Honesty: No One Gives a Rat's Ass About Greece
It's high time for some honesty. No one cares about Greece, except Greeks. Greece is a mere 2% of Eurozone GDP..
All this fantasyland talk of Armageggon if Greece exits the euro is total nonsense. The world will not end when Greece defaults. Indeed, the world might breathe a sigh of relief.
So Why the Fear-Mongering?
That answer is easy. Bureaucrats have said for too long and in too many ways that "no one can leave the euro".
This is not about what is best for Greece. Is is about "face saving" of bureaucrats whose collective faces deserve to be dipped something far more smelly than mud.
Rather than let Greece default gracefully, all the nanny-zone fools cling to false hopes, while Merkel blatantly lies about wanting to keep Greece in the nanny-zone.
It was in the best interest of Greece to not let them in the Eurozone in the first place. Then it was in the best interest of them to default 2 years ago, 1 year ago, and 6 months ago.
Instead, because Merkel does not want to take the blame for kicking Greece out of the Eurozone, we see all the extra impossible-to-meet demands that have Greek technocrats jumping through hoops backwards to meet.
It is a travesty of justice what the technocrats, the nanny-zone supporters, and the politicians have done to Greece.
Anyone with any common sense knew Greece would default. Furthermore, if you are going to default anyway, then the earlier the default the better. In the name of stubborn face-saving Greece was destroyed.
Portugal and Spain better pay attention because they are on deck for the same treatment. As soon as Germans have to pay up, patience with those countries will wear thin as well.
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Both Spanish and Italian bonds are doing well on the markets, spread under 350 and falling on 10y bonds, lower on short term bonds. While 350 is still too high, it's not a value leading to default, and it has been steadily going down, while rating agencies are slowly being ignored by the market. 250 is considered a good value while the crysis lasts, later on ideally it should be 0.
The problem with Greece originated a few years back, when the EU (especially Germany) made it clear it would not guarantee with its institutions for bonds named in euro. That's when the whole spread thing was born (it was basically 0 for everyone before that moment), and it has caused alot of harm. Like some economists say, the EU needs to put in place firewalls big enough to reassure market and so they would never be used, or while the situation seems better now, overall it's still unstable and needs fixing.
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US is in debt too. This doesnt make sense, if the whole world is in debt, then who's rich here?
If we owe each other money, shouldn't one benefit from this whole thing?
Is this explained already? Theres 65 pages and I really don't have time to scroll through them all.
So what will happen? Will the Euros be nothing but trash?
like this image I posted right here? just pile and pile of trash.
![[image loading]](http://www.boston.com/bostonglobe/regional_editions/globe_west/west/pile%20of%20garbage.jpg)
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On February 15 2012 09:16 Ganondorf wrote:
Both Spanish and Italian bonds are doing well on the markets, spread under 350 and falling on 10y bonds, lower on short term bonds. While 350 is still too high, it's not a value leading to default, and it has been steadily going down, while rating agencies are slowly being ignored by the market. 250 is considered a good value while the crysis lasts, later on ideally it should be 0.
The problem with Greece originated a few years back, when the EU (especially Germany) made it clear it would not guarantee with its institutions for bonds named in euro. That's when the whole spread thing was born (it was basically 0 for everyone before that moment), and it has caused alot of harm. Like some economists say, the EU needs to put in place firewalls big enough to reassure market and so they would never be used, or while the situation seems better now, overall it's still unstable and needs fixing.
Eurobonds would mean that the richer countries would pay permanently for debt raised by the poorer ones.With eurobonds there would not be any punishment for reckless lending. As long there are countries which are not capable to collect taxes from their rich people (instead raise debt), Eurobonds will not become reality.
Some facts:
* In Germany there is no minimum wage
* Pension starts at age of 67 years up to 70 (currently discussed) for a now 40 year old.
* tax collection system is extremely tough. Punishment for tax betrayal is higher than for robbery.
* tax rates are high
* real income did not climb for at least 10 years (rised 30..40% in some of the countries now in trouble)
* per person income is ~30000 euros, that's about average in the eurozone afaik. E.g. Ireland (was?) 45000 some years before.
So you won't find many people supporting finance transfers here ..
BTW: if you have a deeper look at the numbers, it is pretty clear that spain and portugal are likely to fail. 20% out of job + Recession+austerity+too much debt = insolvency
Another thing: huge "firewalls" will not stop the overall fatal development of reckless debt rising. Those firewalls will just delay the meltdown some years. The meltdown then will be much harder. Rising debt is not a sustainable model to drive economies.
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On February 15 2012 09:23 toopham wrote:US is in debt too. This doesnt make sense, if the whole world is in debt, then who's rich here? If we owe each other money, shouldn't one benefit from this whole thing? Is this explained already? Theres 65 pages and I really don't have time to scroll through them all. So what will happen? Will the Euros be nothing but trash? like this image I posted right here? just pile and pile of trash.
I think basically the western democracies fail to properly tax their rich people. Instead they raise debt to finance polity and social systems. This can only work if you lower debt by substantial inflation (US does this, Europe can't).
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I think basically the western democracies fail to properly tax their rich people. Instead they raise debt to finance polity and social systems. This can only work if you lower debt by substantial inflation (US does this, Europe can't).
I'm sure this has been pointed out before, but even taxing the rich at a 100% rate would not come anywhere near close to fixing the West's debt problems. Even if you taxed all their income at 100% and seized and sold all their assets it wouldn't work - who would have the money to buy those assets? And if you tax "the rich" and "corporations" at a confiscatory tax rate, what would that do to the economy?
The only solutions that would actually work would be severely raising taxes on the rich and the middle class, or severely cutting spending, or somewhat less severely cutting spending while somewhat less severely raising taxes on the rich and the middle class.
Raising taxes on the middle class, severely or not, is not politically tenable anymore and neither is severely (or not) cutting spending.
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EPT
China #1 
