Deflation isn't the economic boogeyman that toothfairy economists believe it is .
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lesson in economics that even a simple minded right winger can understand
- Thread starter Free Thinker
- Start date
Deflation isn't the economic boogeyman that toothfairy economists believe it is .
Quote from mrbill:
Excellent post, OP. But, it's too bad your heading is false. So much just went over the heads of so many, not to even mention Lucrum, who is just trying to figure out a one liner to say you're somehow wrong, but all those big words get in the way.
The historical argument about trickle down has been proven to not work, and even though there are points to be made, would never work in this economic environment (almost zero interest, no demand due to lack of jobs), and if there were something there, it would have happened over the last years of these super low taxes.
Complete nonsense govt spending is always inefficient.
It's like gift giving on a huge scale.
Either sentimentally overpaying for something the other person does value (but not so much as to actually spend their own money ) or getting something for nothing at another's expense.
At least with gift giving the inefficiency is voluntary not so much with taxes.
Also part of the efficiency problem is people who are given something, usually value what is given directly in proportion to the effort that it took for them to achieve it.
There is no multiplier effect in either case, all you have done is pay an exorbitant premium for the sentiment.
That may work out fine in interpersonal relationships but it's a disaster for a whole society to squander it's resources upon.
Quote from PHOENIX TRADING:
Complete nonsense govt spending is always inefficient.
It's like gift giving on a huge scale.
Either sentimentally overpaying for something the other person does value (but not so much as to actually spend their own money ) or getting something for nothing at another's expense.
At least with gift giving the inefficiency is voluntary not so much with taxes.
Also part of the efficiency problem is people who are given something, usually value what is given directly in proportion to the effort that it took for them to achieve it.
There is no multiplier effect in either case, all you have done is pay an exorbitant premium for the sentiment.
That may work out fine in interpersonal relationships but it's a disaster for a whole society to squander it's resources upon.
OK, agree with you about a lot of government inefficiency, granted. Needs a LOT of improvement. However the basic premise of keeping some money moving is pretty basic economics. Is it better to let someone sit with no money to spend while unemployed, as an example, or to allow them to have some support for them and their families to spend to keep the money flowing locally?
In the carrot example, it makes sense to use Aya's money for some fruitful use, no pun intended. IMO.
Quote from mrbill:
OK, agree with you about a lot of government inefficiency, granted. Needs a LOT of improvement.
That's the fallacy.
Gross Inefficiency cannot be eliminated.
Just like systemic market risk cannot be separated from investments, govt incompetence, unintended consequences and inefficiency cannot be wrung out of gubbermint spending. because that's the only thing gubbermint does well (ie: incompetence, unintended consequences and inefficiency).
Quote from mrbill:
OK, agree with you about a lot of government inefficiency, granted. Needs a LOT of improvement. However the basic premise of keeping some money moving is pretty basic economics. Is it better to let someone sit with no money to spend while unemployed, as an example, or to allow them to have some support for them and their families to spend to keep the money flowing locally?
In the carrot example, it makes sense to use Aya's money for some fruitful use, no pun intended. IMO.
Your argument is further proof that "the road to hell is paved with good intentions". I'm sure there were many advocates 30-40 years ago who said the exact same thing as it pertains to govt assistance for housing, medical care, food stamps, etc, etc...Unless there is a finite expiration on this form of government assistance, you run the risk of creating an entirely dependent class of citizenry.
In more recent times, a perfect example is ZIRP. At the inception it was argued to be an emergency and temporary "stop gap" to an economy that was in "crisis mode". Here we are 4 years later and each policy meeting is a further extension of this "emercency policy". They've already assured us that it will run into 2015. Seven f'ing years of zero interest rates...
Does anybody really believe that in 2015-16, they will be able to raise rates even 100-200 bps? Imagine the debt load in another four years of reckless spending to try and "stimulate" a broken economy.
Quote from Max E. Pad:
I agree with you, its cheaper and easier to lower the price of carrots. and there will be ample demand within the united states once the price goes low enough.
So instead of the krugman, bernanke, approach, of trying to inflate prices, why dont we balance the budget, and allow prices to drop? You guys are hunting for demand, well when prices go down demand goes up, Like you said, the great thing about this approach is that we dont have to spend any money.
The lack of demand is being caused by the fact that prices are out of range, if prices go down demand will go up.
I've been saying this for years. Not necessarily the "balance the budget" aspect; that's like believing in unicorns. On the other hand, a reduced cost of living would go a long way's towards re-building this country. Industries COULD become competitive again at reduced wages IF the cost of living adjusts towards the naturally lower level of economic activity.
Yes, the critics will point to all of the defaults said adjustment would cause...well, we've already been experiencing massive losses, banks hiding bad assets for years IN SPITE of BB going on his ZIRP inspired asset reflationary gamut. We've added trillions in debt to keep the economy at stall speed.
Even under the utopian solutions of Krugman, we eventually hit the brick wall. All it does is shift it forward another few years and add trillions more debt that would never be honored.
Quote from mrbill:
OK, agree with you about a lot of government inefficiency, granted. Needs a LOT of improvement. However the basic premise of keeping some money moving is pretty basic economics. Is it better to let someone sit with no money to spend while unemployed, as an example, or to allow them to have some support for them and their families to spend to keep the money flowing locally?
In the carrot example, it makes sense to use Aya's money for some fruitful use, no pun intended. IMO.
But who should be 'allowed' money, the people who work or those who do nothing? If they get hungry enough they will work.
It's also pretty basic economics that if the government does that every single year, borrowing costs will eventually force the government to print money and impoverish everyone.
Quote from Free Thinker:
as indicated by the price of money the government has to pay there are dozens of Ayas eager to lend money to obama. next.
Money is cheap (i.e., yields are low) because when nobody else wants to buy a Treasury bond the Federal Reserve does, with money created out of thin air. There is no real market price of U.S bonds. Me, I think you'd have to be crazy to lend to the U.S. government at current rates.
Their creating money out of thin air has about the same net effect that the finance sector's money creation, through collateral chains, has, i.e. not much, because spenders are not getting their hands on it. Hence, no inflation.Quote from rew:
Money is cheap (i.e., yields are low) because when nobody else wants to buy a Treasury bond the Federal Reserve does, with money created out of thin air. There is no real market price of U.S bonds. Me, I think you'd have to be crazy to lend to the U.S. government at current rates.
You are correct, but formerly, not now, about the demand for U.S. debt:
"Guess Who's Buying All the Bonds? (It's Not the Fed)"
Published: Friday, 8 Jun 2012 | 2:09 PM ET
By: Jeff Cox
CNBC.com Senior Writer
http://www.cnbc.com/id/47738555
And, "Who Else Is Buying U.S. Treasuries?"
By James Bianco - June 14th, 2012, 8:30AM
http://www.ritholtz.com/blog/2012/06/who-else-is-buying-u-s-treasuries/