Ron Paul seems to be cool!

[Imran Siddiqui]

[q=OneFootInTheGrave]Role of central banks is criticized there as they create "artificial" conditions through interest rate setting, which than "trick" the investors into believing that the market is ready for their investments as there is lots of cheap money around (hey that was the case few years ago with dot.com boom/ than recession avoiding maneuvres), that in turn create an "imaginary" bubble which has to be followed by a bust to allow the "correction" or alignment with the market to happen.[/q]

On the other hand, with a "free-er" market and lack of the Fed, the US had some pretty nasty recessions every few years. People forget the "Panic of 1873" and the "Panic of 1893". Now, granted, the Fed's actions during the Panic of 1938 caused the Great Depression, but it's far smarter now and understand monetary policy far better than it did then.

However, the Panic of 1893, especially was a pretty nasty downturn in the economy. And, IIRC, still remains the second worst downturn after the Great Depression that we've ever had.

[Kidlicious]

In 1929, we were on the gold standard, and still had that gold standard mentality.

[OneFootInTheGrave]

Originally posted by Kidicious

During a depression? How is that suppose to work. That's a new one on me. Suppose that the central bank did cause a depression and a gold standard was implemented. How is that suppose to help the economy to recover?

well according to them I guess the mechanism is that the "bad investments" in the market will fail, and the good ones will take the place leading to an eventual equilibrium. Why it is a depression in the first place is only because through central encouragement "many" made the same mistake at the same time thus leading to a depression when this situation was unsustainable anymore. If you remove the central control those errors will still happen but just be randomly distributed allowing the market to absorb them (as they are small enough) and not cause a depression.

Of course this can be contested, but I think this is the idea of a mechanism how it works - in any case I would say that if it works, given the current situation the correction would be far too severe and would cause unimaginable problems, so it would be good to control the correction and live with the "slowness of such action" in exchange for social safety, and unlock some of their ideas once when were are much closer to an equilibrium, to let the free market "magic" do it's work, and avoid subsequent depressions...

in any case my main point is that Ron's ideas are not so whacky as they seem at first look.

Loaded language. What the central bank does actually is lower interest rates to encourage investment to prevent what would otherwise be a recession? The Fed has done it repeadedly over the years.

point is that the recession than (natually occuring) would be less than what is coming...

I think that Austrians claim the constant 1990's recession in Japan, as one of their cases in point where there was a lot of govenmental intervention, but no economic resolution due to not allowing the market to realign. So the Japanese gov/central bank was doing the wrong stuff in trying to help, but if they let the market adjust itself, it would have happened much faster and the economy would be healthy sooner... I guess the Japanese never dreamed of getting a bad recession, and neither do we... but it looks like one is in the works right now...

What is the connection between low rates and banks creating this investment packages? They would have done it anyway. The problem is the banks and their regulatory agencies. It had nothing to do with monetary policy. And btw, I'm sure that the libertarians have some plan to do away with the regulatory agencies too.

main point being is that while reckless spending will happen anyhow from time to time by reckless investors (hey there are always bad decisions), what the Bank introduces centrally is that everyone is coerced into the errors at the same time - the time of boom via their boom "extension" policies. Which than in turn creates a bigger bust as the unchecked problems are allowed to develop and the market which would normally prevent them, but does not react due to the unrealisitcally favourable market conditions. Case in point, sub prime mess right now.

A long boom period is just what we want. In fact, because we use monetary policy we can add extra liquidity to the economy that we would not be able to do with the gold standard. With the gold standard it would be recession for sure. It would be total panic. Notice how the markets were calmed when the Fed took action?

yes we all want a long boom, but we want it on sound economic basis, and not on "imaginary" money supply, as once this imagination meets reality it will give you a true depression. Now how gold standard ties into this thinking I am not clear, but perhaps Ron knows better on that one ...

in any case the paragraph in Wiki that you quoted did take the most sensationalist effects of applying the ABC theory, and in reality if he is a subscriber to that line of economic thought it is not necessarily so crazy as it might seem at first thought.

[OneFootInTheGrave]

Originally posted by Imran Siddiqui
[q=OneFootInTheGrave]Role of central banks is criticized there as they create "artificial" conditions through interest rate setting, which than "trick" the investors into believing that the market is ready for their investments as there is lots of cheap money around (hey that was the case few years ago with dot.com boom/ than recession avoiding maneuvres), that in turn create an "imaginary" bubble which has to be followed by a bust to allow the "correction" or alignment with the market to happen.[/q]

On the other hand, with a "free-er" market and lack of the Fed, the US had some pretty nasty recessions every few years. People forget the "Panic of 1873" and the "Panic of 1893". Now, granted, the Fed's actions during the Panic of 1938 caused the Great Depression, but it's far smarter now and understand monetary policy far better than it did then.

However, the Panic of 1893, especially was a pretty nasty downturn in the economy. And, IIRC, still remains the second worst downturn after the Great Depression that we've ever had.

well I would say first that the Austrian model is not my position ;-) ... but it is not so unsound as the paragraph quoted by kidicious makes it be.

In any case they are still for regulation of practices without a doubt. So that the fraud induced failure which in principle was mostly responsible for the great failures and the depressions of 1800's and early 20th century is kept in check. Fraud only failed back than when the whole market collapsed because of it, and that was bringing in the cyclical symptoms to the early laissez faire economy which was free fraud and bullying for all.

They are as I understand for letting the market work freely, which does not mean to let the fradusters to work freely as well.

[Agathon]

Originally posted by OneFootInTheGrave

well while whast you see on Digg are nutters, the UK economic turnaround with Thatcher for example was greatly influenced by their thought... now you might think she was a nut too, and I partially agree but there are good ideas within that school of economic thought, many of them are used today too in the mainstream...

so Ron agreeing with them is not so whacky, saying he is a "nut" for it well is nutty

What turnaround?

I was in the UK for extended stays in 1983 and 1991-2, 2003 and 2007. I can tell you one thing. There is a world of difference between the Britain of 1992 and the Britain of 2003. Certain things are the same, like the inability of Britons to understand the meaning of the words "customer service", but I didn't quite realize how bad Thatcher was until I turned up after Labour had been running things for a while (and I hate them as well). It was like a different country.

Playing with figures and making rich people a lot richer does not consitute an economic turnaround for most people.

[Imran Siddiqui]

Originally posted by OneFootInTheGrave
well I would say first that the Austrian model is not my position ;-) ... but it is not so unsound as the paragraph quoted by kidicious makes it be.

In any case they are still for regulation of practices without a doubt. So that the fraud induced failure which in principle was mostly responsible for the great failures and the depressions of 1800's and early 20th century is kept in check. Fraud only failed back than when the whole market collapsed because of it, and that was bringing in the cyclical symptoms to the early laissez faire economy which was free fraud and bullying for all.

They are as I understand for letting the market work freely, which does not mean to let the fradusters to work freely as well.

It wasn't really fraud that caused then. The Panic of 1893 was actually caused by a run on the gold supply (imagine that), after the government wanted to add silver as backing for notes as well. That caused banks to call in their loans, which escalated and caused a massive downturn.

The Panic of 1873 was a result of the Cooke Co. realizing it had become seriously overextended in investing in railroad construction and had to declare bankruptcy. Which caused a massive domino effect.

[Kidlicious]

Originally posted by OneFootInTheGrave

Originally posted by Kidicious

During a depression? How is that suppose to work. That's a new one on me. Suppose that the central bank did cause a depression and a gold standard was implemented. How is that suppose to help the economy to recover?

well according to them I guess the mechanism is that the "bad investments" in the market will fail, and the good ones will take the place leading to an eventual equilibrium.

The problem is that people don't have income to buy things and businesses are failing at a high rate. There aren't any good investments to be made.

They don't understand a depression at all. The problem in a depression isn't just that a bunch of investments failed. The real problem is that no one has any confidence in the economy anymore. Peoples expectations are very bad. When people's expectations are bad investment suffers. That's Keynesian theory, and we've discovered over the years that it holds true.

What you need in a depression is government intervention to boost incomes and expectations. When the government does nothing expectations get worse.

Why it is a depression in the first place is only because through central encouragement "many" made the same mistake at the same time thus leading to a depression when this situation was unsustainable anymore. If you remove the central control those errors will still happen but just be randomly distributed allowing the market to absorb them (as they are small enough) and not cause a depression.

By that logic we shouldn't have any banks. That would make things sustainable now wouldn't it.

No, I'm afraid that wouldn't work. The economy would not only fail to grow, it would collapse. Capitalism needs to grow. It can't just function in stability.

Do you know of the theory of creative destruction? Accordingly the economy must constantly be creating and destroying to function and thrive.

The beauty of Keynesian economics is you can create a recovery.

[Kidlicious]

More points. In a depression equalibrium can not be regained without govt intervention (not in the short run anyway). Prices stick. That's why you see pictures of the Great Depression of farm produce piled up on the side of roads. This is why wages don't fall. Investments aren't made because businesses can't afford to pay workers due to the low, and falling, prices of their finished products. Austrian school economics is a joke. They ignore facts.

Also, the gold standard is a known failure. The problem with the gold standard, besides the fact that it causes depressions is that currency speculators attack the currency when they think the government will drop the standard. The speculation itself causes the government to drop it. This has happened over and over. With each dollar gained by speculators the improbability of a gold standard increases, because it becomes harder and harder for the government to stick with it. If the US tried a gold standard today it would probably only last a few months at the most.

[Berzerker]

In 1929, we were on the gold standard, and still had that gold standard mentality.

The Fed was in existence, and the Fed was in control of money supply, and the Fed screwed up. Gold didn't cause the market crash or the Depression

Oh, and FDR took us off gold when he came into power in '33, quite the coincidence I'd say. Gold was a check on inflation by limiting how much paper money could be printed by the politicians.

[Imran Siddiqui]

Oh, and FDR took us off gold when he came into power in '33, quite the coincidence I'd say. Gold was a check on inflation by limiting how much paper money could be printed by the politicians.

I'm not exactly sure how FDR taking the US off the gold standard in the middle of its worst economic downturn, and succeeding in alleviating some of its worst effects, is an argument for the gold standard.

[Seeker]

(ignores rest of thread)

If I was an American, I'd vote for him just to shake things up. You guys really really really need a breath of fresh air or at least a 'blast from the past'.

All the other candidates are Bush or Clinton to various degrees.

Of course it would be really funny seeming how a Paul Administration would (not) get along with Congress...

Not to mention the Bush appointed Supremes...

Paul: I don't have that power...
thomas, scalia, et al: You do have that power...and more!!
Paul: I DON'T have that power...and LESS!
Bush Supremes: You DO have that power...and ALL POWER!!
Paul: (fires everyone, makes Presidency minimum wage + tips job)

[Berzerker]

I'm not exactly sure how FDR taking the US off the gold standard in the middle of its worst economic downturn, and succeeding in alleviating some of its worst effects, is an argument for the gold standard.

He did it early in '33, not the middle of our worst economic downturn, but go right ahead and tell us how FDR saved us from the worst effects of the Depression by banning constitutional money.

[Aeson]

Paul: (fires everyone, makes Presidency minimum wage + tips job)

I might actually vote for that...

[aneeshm]

Originally posted by Kidicious

The beauty of Keynesian economics is you can create a recovery.

And the beauty of nutcase physics is that you can create free energy.

[aneeshm]

Originally posted by Agathon
Q. Hey, what's the difference between Libertarians and Communists?

A. Communism has succeeded in actually producing stable, if not rich, societies. Libertarianism is so kooky that no-one's ever going to go for it.

Which of these "stable, if not rich" societies would you prefer to live in, Aggie, compared to where you are now?