Economists expect report of first deflation in 54 years

[Felch]

Your view of capitalism is rather naive. While the arguments for good greed might have held in small businesses or family owned corporations, nowadays greed leads talentless hacks to lie, cheat, and steal for their bonuses while the company is falling apart long-term.

I agree. That doesn't mean that capitalism doesn't work. It simply means that we need a useful framework of laws to minimize the effects of talentless hacks. Reform is the solution, not revolution.

Because that's working so well now.

What's your point? I'm saying that it's possible. You're not saying much at all.

It will take a lot more than a trillion dollars to cause inflation.

The value of money is related to its supply and demand. Increasing the supply decreases its value.

In a free market with securitized mortgages, I'd be surprised if you could identify your creditor if by some miracle your mortgage was still in one or a few pieces. (If not... guess what, the holder of the most junior tranche probably has no intention of renegotiating terms.)

Then they get jack ****. I never told them to securitize. They either make a deal, or they don't.

The sort of completely unregulated hardcore capitalism you advocate died long before Soviet "communism."

I don't propose unregulated capitalism. Capitalism requires the rule of law. And if the Soviet Union wasn't communist, then what was? Or are you a believer in magical fairy tales?

No... greed lost to fear.

Greed is sometimes irrational. Fear is sometimes rational. We use different words, but we mean the same thing.

Very true. Maybe someone should have told Wall Street.

I prefer to think of your solution as slitting our wrists to make the rest of the pain go away.

You caught me. I'm actually a teenage girl. Have you seen my livejournal?

Two different analogies, based on two different views. I don't advocate economic suicide, just the willingness to let the pain happen and be done with it.

Yes, if deflation starts, print money. When deflation stops, stop printing excess money.

Who gets the money. If it's me, I'm cool with that. If it's given to the bottom fifty percent of wage earners, I'm cool with that. If it's given to the same banks that got us into this mess, then I have a problem.

At what cost though?

At an immense cost. We should have learned our lessons, but we didn't.

Yes, but a world-wide worker's revolution isn't exactly how I'd want my problems to sort themselves out. That or the apocalypse in some form are the only possible end-points for totally unfettered capitalism.

I'm rooting for an apocalypse. I've got canned food, a couple guns, plenty of ammo, batteries, the whole nine yards. I'm a libertarian.

It would take much longer than that, but the problem is a lot of economists aren't even trying. They treat the market as a black box with certain characteristics and never bother to question what's inside or whether their assumptions lead to useful results in practice.

It's not a black box. But it is very complex. I agree though that economists are pretty lazy as far as scientists go. If physics were run like economics, we'd still treat Aristotle as an expert on the subject.

[Felch]

It is exactly due to many production already being almost fully automated and communication being so cheap, that there is so little to do for the money. Remember, that investments need to be profitable - and not only that: they should be the MOST profitable option.

Sure, a lot of private homes could have gotten solar panels up, and this way invest their money into the real economy - yet, the ´Telecom´ stocks seemed to be a more profitable investment - until it crashed. Just one example out of the top out of my head...

There's plenty to do with money. Look at telecoms expanding into Africa. Do we have a space elevator yet? We don't lack in places to invest, we lack in ideas.

[Kidlicious]

The USSR
China under Mao
Cuba
North Korea

Yeah, planned economies are winners.

What planet are you from?

A central state committee has never managed an economy better than a market. They do a better job than a Czar, which I admitted in the Venezuela thread. But compared to a free market, a planned economy is unresponsive, shows little initiative, and is too politicized to be effective.

Again, you are flat out wrong. When does a planned economy face a crisis to respond to? About the only one I can think of is Cuba. The Cuban economy had to respond to the collapse of the USSR and the US embargo. And it has done so very well.

As you admit, the USSR did a better job than the Czar. But it's not just the USSR, all command economies have been improvements on the previous systems. A command economy is always an improvement, and the same will be true when modern industrialized economies completely fail. The command economies that replace them will be superior to what they replace.

Show me Capitalism's long history of failures. For every downturn, you'll see an upward progression that makes up for it and then some.

Repeated and worsening failure is not progression. The only progression is that to a better system.

[Felch]

Read Marx, Engels or the ´Black book of capitalism´ (Robert Kurz) for that. There are plenty. It can in fact be argued, that for every upward progression, you´ll see a downturn that makes up for it and then some. Remember, that you also have to see things on the global scale - sure WE are relatively well off right now...

Well, that'd be a lot of work. I'm lazy. How about you rattle a few off?

I'm guessing these would mostly consist of third world countries that were left impoverished by colonialism. Is that about right? I'd say in response that the reason these countries were hurt by capitalism is that they failed to compete aggressively. South Korea was a Japanese colony that improved itself through capitalism. Hong Kong was a British colony that improved itself through capitalism while it was still a colony. If Tanzania suffered, it was because Julius Nyerere (a good guy with good intentions) imposed a home brewed brand of socialism on it.

[Felch]

Again, you are flat out wrong. When does a planned economy face a crisis to respond to? About the only one I can think of is Cuba. The Cuban economy had to respond to the collapse of the USSR and the US embargo. And it has done so very well.

As you admit, the USSR did a better job than the Czar. But it's not just the USSR, all command economies have been improvements on the previous systems. A command economy is always an improvement, and the same will be true when modern industrialized economies completely fail. The command economies that replace them will be superior to what they replace.

Really? You honestly believe this? You're like a Commie Kenobi.

Cuba was boned after the Soviet Union pulled out. It was "saved" by resorting to a limited form of capitalism, where Canadian and Europeans would spend their vacations at crappy resorts the natives were forbidden from entering. Then when Hugo Chavez came into his oil wealth, Cuba was able to tone down the capitalism. Hardly a success story.

Where do you get your information from?

[Victor Galis]

The USSR
Show me Capitalism's long history of failures. For every downturn, you'll see an upward progression that makes up for it and then some.

Compare post-war growth rates with growth rates in the late 1800s. (In the US) Capitalism with all its jagged edges is hardly better than Marxism. Only if you soften those do you have dynamic wonderful thing.

I agree. That doesn't mean that capitalism doesn't work. It simply means that we need a useful framework of laws to minimize the effects of talentless hacks. Reform is the solution, not revolution.

Right, but I think you and I differ sharply on the quantity of laws that should be in place to soften things up.

The value of money is related to its supply and demand. Increasing the supply decreases its value.

And I'm telling you a trillion is a drop in the monetary bucket.

Then they get jack ****. I never told them to securitize. They either make a deal, or they don't.

Your bank who sold the mortgage to other people doesn't care. The holders of the senior tranches which would get paid even if they foreclose don't care. The people who you would wipe out by renegotiating have a choice between calling your bluff or walking away with nothing.

And if the Soviet Union wasn't communist, then what was? Or are you a believer in magical fairy tales?

"Communism" was a fairy tale the Soviet elite told the masses so they could keep control while life was ****y. Yes, it was a planned economy, badly mismanaged by people who weren't really trying to improve the general welfare, fighting an arms race it had no business fighting.

Greed is sometimes irrational. Fear is sometimes rational. We use different words, but we mean the same thing.

No. I think the markets are still irrational. The initial panic had everyone selling anything they could even the things that weren't that badly affected.

Who gets the money. If it's me, I'm cool with that. If it's given to the bottom fifty percent of wage earners, I'm cool with that. If it's given to the same banks that got us into this mess, then I have a problem.

I'd suggest paying down some of the debt with it. That way when we need to stop printing it but we're still running a deficit we have a little more breathing space.

At an immense cost. We should have learned our lessons, but we didn't.

So what makes you think we'll learn this time?

I'm rooting for an apocalypse. I've got canned food, a couple guns, plenty of ammo, batteries, the whole nine yards. I'm a libertarian.

Well, as long as it doesn't involve nukes you're pretty set. I'm personally envisioning some sort of environmental disaster where food production falls sharply triggering global instability.

It's not a black box. But it is very complex. I agree though that economists are pretty lazy as far as scientists go.

I wouldn't call it lazy. The problem is certain neoclassical assumptions, never proven, have somehow become dogma. Then loads of fancy math has been built upon a foundation of sand. When the conclusions drawn disagree with reality, they reject reality or try slightly different math.

I have very mixed feelings about economics. Some days I wonder why I even bothered, other days I'm excited at how easy it should be to make a meaningful advance given the amount of things that are just now being looked at.

If physics were run like economics, we'd still treat Aristotle as an expert on the subject.

Yeah, we'd still be ostracising those heretics that don't believe the Earth is the centre of the Universe.

[Felch]

Compare post-war growth rates with growth rates in the late 1800s. (In the US) Capitalism with all its jagged edges is hardly better than Marxism. Only if you soften those do you have dynamic wonderful thing.

I'll have a look when I can. Any good places to check?

Right, but I think you and I differ sharply on the quantity of laws that should be in place to soften things up.

Well yeah. We differ in our views. But we can both agree that laws have to be in place to protect people from fraud.

And I'm telling you a trillion is a drop in the monetary bucket.

How many trillions are floating around? My guess is that it would raise the inflation rate by ~2%. But then again, I have no idea about the true numbers.

Your bank who sold the mortgage to other people doesn't care. The holders of the senior tranches which would get paid even if they foreclose don't care. The people who you would wipe out by renegotiating have a choice between calling your bluff or walking away with nothing.

Then they walk away. Junior tranches were sold at a discount for that very reason.

"Communism" was a fairy tale the Soviet elite told the masses so they could keep control while life was ****y. Yes, it was a planned economy, badly mismanaged by people who weren't really trying to improve the general welfare, fighting an arms race it had no business fighting.

I agree. I'm wondering how Agathon feels about the the practical history of Marxist theory.

No. I think the markets are still irrational. The initial panic had everyone selling anything they could even the things that weren't that badly affected.

DanS has been buying. I've been buying. I think that the bubble was irrational, and people came to their senses. You're right that a lot of lemmings sold things they shouldn't sell, but they're idiots. You can't stop human idiocy, it's a powerful force.

I'd suggest paying down some of the debt with it. That way when we need to stop printing it but we're still running a deficit we have a little more breathing space.

Sounds good. Would it pull us out of a deflationary spiral though?

So what makes you think we'll learn this time?

Good point. I'd learn my lesson, but some people aren't so clever.

Well, as long as it doesn't involve nukes you're pretty set. I'm personally envisioning some sort of environmental disaster where food production falls sharply triggering global instability.

I've seen charts about the predicted survival rate in Maryland in the event of a nuclear war. Let's just say that I'm not worried about starving to death in one.

Environmental disasters would be interesting. The guy with the most guns will eat though, so sell your Prius and buy a Bushmaster.

[Unimatrix11]

Edited my previous post for examples, Felch.

[Unimatrix11]

Is it not logical, that if one side failed, because it did not compete aggresively enough, that had it done so, the other side would have failed instead? Like Japanese cars and playstations - each formely non-´western´ country being equally successful - imagine what that would have meant for the ´west´ ! Would that even be possible at all?

[notyoueither]

Well, this thread's bought it.

[Barnabas]

I lived with deflation the years 98-2002

If you don't lose your job, and you don't work in a shop, it is not bad. But it is definitely not good at all.

[Blaupanzer]

[QUOTE=Agathon;5536532]
This is pure faith based economics, and deserves no more time than a witch doctor's economic theory. [QUOTE]

Says the Marxist. Felch's "faith-based" theory in relation to money supplies and inflation/deflation is just as provable as Marx's (who doesn't have any faith in markets or money supplies). The witch doctor's theory is probably amorphous, filled with truisms, and cannot link micro with macro in a single theory. In other words, just like those spouted by every other economist teaching college level courses in America.

[Felch]

Edited my previous post for examples, Felch.

Thanks. We disagree on a few things.

The First World War had relatively little to do with capitalism. It had very little to do with anything really. It happened to be the case that the countries involved were more or less capitalistic, but they probably would have gone to war regardless.

Considering the socialist economies of 20th century Eastern Europe to be capitalist is a stretch. It's kind of like how I consider the mixed market economies of modern Europe to be communist. Deviation from orthodoxy is often considered siding with the "enemy". So we'll leave that be.

As far as the case of non-monetary trade, I don't see how that is anti-free market. If you choose to barter rather than exchange cash, you are still choosing to barter, and the freedom to choose your economic actions is what defines the free market. GDP is an unreliable measure, as you point out, and you're right that it fails to account for barter. But that doesn't mean that capitalism causes harm.

Sentimental value is not accounted for in GDP, you're right about that. Would your grandmother be prohibited from knitting in a free market? Absolutely not. Would she be encouraged to do so in a planned economy? I doubt it. Planned economies have no room for sentiment, while the free market seeks to profit from it. Personally I'd prefer profit to prohibition.

[OzzyKP]

EDIT II: In general it´s hard to compare a ´truely´ communists ´state´s wealth with that of a capatalistc one, since you cant just take the GDP of both. GDP is generated mostly by ways that communism strives to eliminate. If you knit a sock for your neighbor, who then cuts your hair as a price, that´s 0 in GDP. If you produce a sock for someone else, who then sells it, there is no barber involved yet, but it already counts twice in the GDP (your loan, and the transaction of selling the sock). This assessment may not be all too accurate, but you get the idea...

I don't think there is much less of that in capitalist countries.

[Felch]

I lived with deflation the years 98-2002

If you don't lose your job, and you don't work in a shop, it is not bad. But it is definitely not good at all.

It's not good. But it is good for you. It's like having the flu. Once you're done throwing up and crapping uncontrollably, you get over it. The virus gets flushed out.