Economists expect report of first deflation in 54 years

[Agathon]

If Marxism has never happened, then he couldn't have had any empirical evidence for his claims. In other words, Agathon, Marx was dealing in fairy tales.

No. He and other Marxists have quite specific reasons for why they think things will turn out that way. It's not shooting in the dark, but a reasoned prediction. It may be wrong, but it deserves an answer. It's really no different from people making other predictions of unprecedented events from theories that do have evidential backup.

Saying that the free market will solve current problems "just because" is shooting in the dark.

It's as if I claimed that Angelina Jolie was going to come to my house and screw me, and, if someone objected, I just said "she's coming".

I don't know if I claimed that loans at negative interest would be likely (I'm not about to re-read even my own posts in this thread), but they are a possibility. The free market allows people to do what they want, no matter how stupid.

Why would large numbers of people keep their money in a bank, when they were being charged money for keeping it there?

Let's assume they aren't retarded and they understand what is going on, and that they have somewhere reasonably secure to put their cash. Why wouldn't they withdraw their money? Assuming they wouldn't is like assuming that people would pay a plumber for not doing any work.

[Kidlicious]

Savers would keep cash because of deflation. The real problem is lending that money out in a deflationary environment. If nothing can be done to increase long term spending than lending out money for investment is just going to result in more overinvestment and really **** things up.

[Felch]

Why would large numbers of people keep their money in a bank, when they were being charged money for keeping it there?

Let's assume they aren't retarded and they understand what is going on, and that they have somewhere reasonably secure to put their cash. Why wouldn't they withdraw their money? Assuming they wouldn't is like assuming that people would pay a plumber for not doing any work.

I don't know. I'm not the boss of them. I'm merely saying that anything is possible, so long as people agree to it. I'm not saying it's rational, only possible.

How hard is that to understand? Or do you just want to keep saying the same **** over again?

[Felch]

"The free market allows people to do what they want, no matter how stupid."

Feel free to quote me on that. I love freedom, no matter the consequences.

[DanS]

But the USA does not have an easy answer like Argentina in 2002, devaluate and the crisis will be over.

Well, you know the solution that the authorities are trying -- create inflation, by dropping cash from helicopters, if necessary.

What was your experience during the hyperinflation of the '80s in Argentina?

[Barnabas]

In 1989 poverty jumped from 25% in January to 50% in December, in fact, the inflation problems had begun a few years later, it would be better to say that poverty jumped from 17% in 87 to 50% in 89

You would go to a supermarket and the price of stuff was always outdated. There was great uncertainty. You would grab, say, a can of coke which says 2 pesos in a supermarket, and the cashier would tell you, sorry, that is the old price, now it is 2,25, that happened every day. (the currency back then was called Austral, not Peso, by the way)

In Argentina, people don't trust their currency, people who want to save money, buy dollars, so back then you would see people queueing waiting to buy dollars at some bank, and the line of people would be longer than a block. That happened all over the city. The demand was so high that the banks would run out of dollars, and quarrelss would happen.
All that crazyness for buying dollars only made hyperinflation worse

At the end, people who had dollars in the banks, lost their savings, there was something called Plan Bonex, they lost their dollars and were given bonds in exchange.

Argentina had 3 problems
-Argentina had a huge state, oil companies, gas companies, trains belonged to the state, communications, everything belonged to the state, and all the public companies lost money, even the oil company, so the state had to print money to cover that deficit.
-Argentina used to have almost no foreign debt, but under the 1976 dictatorship which ended in 83 after losing the falklands war, the foreign debt increaed to 40.000 million dollars, half of the gdp, and none of that was invested in useful stuff, they bought weapons for a war with Chile that never happened, they used it for the 1978 Soccer world cup, and stole the rest. And in Reagan times, interest rates were very high. Paying debt was difficult.
-Argentina is a large exporter of agricultural stuff, like Australia or Brazil, and in the middle 80's the price of agricultural exports fell 40%, that made it hard to have trade superavit, to get dollars to pay foreign debt.

The hyperinflation was the reason why the currency peg and even the privatization of public companies was so popular.


By the way, in the 2001 crisis people also lost their savings, in less than 12 years people lost their savings twice. They gave bonds to people who had dollars in the banks, and people who owed money to banks in dollars had their debts turned to pesos, that made their debts much smaller and easier to pay, because once the peg was over once dollar become 3 pesos. Exporters, like farmers, who struggled the whole 90's, paid their debts very easily.

[Kidlicious]

Feel free to quote me on that. I love freedom, no matter the consequences.

How can you measure your freedom without measuring the consequences of your actions?

[VetLegion]

By the way, in the 2001 crisis people also lost their savings, in less than 12 years people lost their savings twice.

Preposterous. For a country not in a war, Argentina was governed inexcusably badly.

[Agathon]

I'm not saying it's rational, only possible.

So is the establishment of a cult where the majority of people cut off their genitals. Possible, but so improbable as to be not worth considering.

You're asking people to give away money for nothing. If that were likely, then why have capitalism at all?

[Felch]

So is the establishment of a cult where the majority of people cut off their genitals. Possible, but so improbable as to be not worth considering.

You're asking people to give away money for nothing. If that were likely, then why have capitalism at all?

Heaven's Gate existed. A Marxist state is still only theoretical.

I'm not asking people to do anything. I'm only saying it's possible.

What about that sentence are you having trouble with?

[VetLegion]

Barnabas, one thing I don't understand. Argentina has been running a budget surplus during the 2001-2008 period. Also, the currency was devalued in the beginning of that period and floated.

So where did the recent need to nationalize the pension funds arise from? Why is the government desperate for funds?

[Agathon]

What about that sentence are you having trouble with?

How it is supposed to add anything substantial to your argument.

Don't worry about it. I don't really care what happens to the economy anyway. Only the theory interests me.

[Barnabas]

It was done because the government is leftist and they are against private pension funds. A system which seems to have failed in Chile (the country that made that system popular in the 90s, we copied them) and in most countries that tried that.

I supported that nationalization because we were going towards a scenario in which the private pension funds, because of bad investments, were going to be unable of paying most people even the minimal pension, and the state was going to end up paying to cover that difference.

My ideal solution would be, if you like private pension funds, fine, but if it breaks due to bad investments, then screw you, the state is not going to give you a pension for free if you did not give money to the state while you worked.

But since moral hazard does not exist in Argentina (or the USA, Europe, the rest of the world etc) nationalizing the private pension funds is the second best thing you can do.

You can find lots of articles about Chile and the private pension funds

http://www.iht.com/articles/2005/01/27/news/chile.php

http://www.nytimes.com/2006/01/10/international/americas/10chile.html

http://www.iht.com/articles/2008/03/10/business/pension.php

But yes, they also nationalized the funds to have some extra cash in these times of crisis to do keynesian stuff.

[VetLegion]

I'm not sure what you mean by "moral hazard". Argentine private funds invested recklessly because of lack of regulation?

Here, most (80%, I think) investments by private pension funds have to be in government bonds, domestic and foreign. That should allow them to maintain the principal, at least. Only a smaller part is in stocks and other risky instruments. In Argentina they could invest wherever they wanted?

From what I read on Bloomberg and the like, nationalization was motivated primarily by the wish to grab the cash because the government lacks it.

This confused me because given that government has been running budget surpluses in last 8 years (you say supravits), rolling over (refinancing) its debt shouldn't have been a problem. So I didn't see the pressing need to nationalize the pension funds. What you are saying is that government didn't really desperately need the money, but nationalized for ideological reasons?

[chequita guevara]

Moral hazard means that if the government bails you out after you've made risky decisions that failed, you have no incentive not to continue engaging in risky behavior. It's why the government here let Lehman Brothers fall (only to discover that it would take AIG with it, and AIG would take everything else down).