Market Shennanigans and Thoughts

Maybe and sorry if that came across poorly.

I am not an expert but I don't believe anyone else is either. Going to school and having other people download their economic biases into ones head doesn't make someone an expert. Knowing what is best economically for the rest of us as individuals is impossible. Sure it adds value to navigating an intentionally complex system designed to transfer risk, costs and profits but that doesn't mean it resides on a foundation of truth.

I have looked at the evidence many times over. It always leads back to a small group of "experts" being given the legal means to create (counterfeit) money and trade it for real goods and services (when needed of course, which eventually becomes always.) That is the Keynesian way in a nutshell. It doesn't work as can be evidenced by the state of things.

"Power Corrupts."

 

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And there it is, folks. Like Sheldon Cooper denying that geology is a real science, so too the Austrian School adherents deny the data and the expertise of trained mainstream economists. This stuff isn't really up for debate - Keynesian economics is hard science - every bit as much as physics with a little mass psychology thrown in. Austrian School is just making up dumb stuff because they can. That and naked political ideology.

Keynes never even touched much on microeconomics - the economics of the individual. His was entirely a macroeconomic paradigm (exclusively large scale), which has never been shown not to work. You just have to look for the stimulus where it happens. In the 2008-09 stimulus, people bought Chinese products. China boomed from U.S. aggregate demand. That stimulus should have been required to go to domestic spending.

 

Let me just interject here to thank the mods for their forbearance on this thread. Not sure I completely agree with anybody here, and not sure how successfully we're "avoiding politics", but I feel like I'm learning a lot from reading these posts.

 

"A central banker walks into a pizzeria to order a pizza. When the pizza is done, he goes up to the counter to get it. There a clerk asks him: "Should I cut it into six pieces or eight pieces?" The central banker replies: "I'm feeling rather hungry right now. You'd better cut it into eight pieces." (lol)

 

And the gold-bug stopped patronizing the store long ago because their pizzas are only backed by cardboard, not a metal pan. He stays at home, admiring his stack of pans, and trying to ignore his growling stomach.

 

I eat pizza but I don't consider it a "store of wealth".

I don't want to be the bad guy and am sorry for any hurt feelings. Maybe I need to learn to present it more civilly but I stand by my POV.

 

BTW, I'm not a hard money proponent, as I don't believe it is even a good store of wealth in anything but medium time horizons. In the extremely long, you run the same risk of fiat currency that falls out of favor as a reserve currency. In the short run, you are impacted by market shocks. In the medium run, you get out what you put in (assuming you didn't buy during a shock), adjusted to inflation.

Oh, and gold does poorly in most scenarios of government collapse. In essence, governments have become so large and encompassing that they are not only the backer of fiat, but of most precious metals, as well.

As for Keynesian economics, I still contend that it only works for those nations that hold reserve currency status. Smaller nations that rely upon larger nations' fiat to back their own fiat don't see as far reaching benefits to Keynesian models. If you really want to look into this, look at South East Asia in the mid- and late- 90s. Additionally, look at Thaksinomics. Populist policy making works... but also creates inflation in the process. A purely Keynesian model creates the eventual outcome of communism (little c, not big C), where the economy is driven by altruism. So long as greed is a factor and money can be made, Keynesian economics solves problems just as well as basically any other mainstream economic model... for reserve currency governments. Why? Because we can afford to mess up and kick the can down the proverbial road.

 

I agree with you (mostly) and am not advocating for a return to a government run gold standard. I do believe gold is a valid alternate to paper markets that appear bloated but so too, diversity.

 

I think Dan and umm, "North", do have some points to offer here. North first, is correct that Keynesian prescriptions vary in their success in the proportion to which a currency is a reserve currency. Remember, Keynes wrote The General Theory at a time when international currency flows were basically a rounding error compared to the domestic economies. Economies were far more isolated (big picture) than they are today. Every currency was a reserve currency basically, because the hugest portion of the economies were domestic. Only very few people travelled internationally or bought foreign goods, especially in the Great Depression, when Keynes wrote it. That said, Keynes' model still works, if you have truly floating exchange rates, and you have the guts to punish currency value manipulation. Of course, when the world's major currency manipulators have nuclear weapons, well....

Dan is onto something about store of wealth, but not in the way he thinks. Keynes was all about ENDING money as a store of wealth. It's intentional, not an accident. Keynes saw capital goods, investment (real investment in land, plant, equipment, not financial assets) as the only useful store of value, and I applaud him for that. We need more of that. Keynes correctly proved that "savings" destroys production and hence wealth, the "paradox of thrift". A lot of Austrian School theory and paleobanking ideology depends on savings, while Keynes disdains it thoroughly. That's how key and early in the thought process the divide happens, and it quickly becomes a chasm.

Stout savings rates are not necessary in a proper Keynesian economy; nor are they even desirable. They are unnecessary for banking purposes, as we see today, and they are drags on productive capacity. Keynes doesn't want people sitting on passive savings, he needs them investing in productive assets like factories and enterprises. So do I.

 

Economics isn't hard science, it's political ideology pretending to be hard science. "What's (not) in your wallet?" Any value the economic experts can take from you while telling you it's for your own good or some greater good (as determined by them).

"Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousand fold by a factor that is insignificant in, say, physics, mathematics, or medicine—the special pleading of selfish interests."

https://mises.org/files/henry-hazlitt-economics-one-lessonpdf/download?token=xBmgeDG7

The quote above is from the introduction to a great read known as "Economics in one lesson", the link will bring those interested to the whole work. Not asking anyone to take my word for anything, I'm asking you to look for yourself (if you haven't already). I hope those that haven't read it yet, do so.

Economics can never be a hard science because it contains "the special pleading of selfish interests." That will always relegate it to the "science" of politics and personal opinion.

 

Folks, don't confuse Apocalyptic Nonsense with Investable Opinions.

Greece was doomed dating back to 1980 when they entered the socialist orbit, but it took 30 years for the s*** to hit the fan. It will take much longer for the U.S.'s problems to bring about some of the fears raised here.

None of us will be alive, I can assure you.

 

And since Dan's quote is from Mises.org, it can be immediately disregarded as junk so outside the mainstream that is fundamentally untrustworthy and useless. Remember, - Austrian School - of, by and for "cranks", over invested in their own entitlement to the exclusion of all else.

Macroeconomics is by its very nature focused on the "we" to the exclusion of the "me", a thing that the Austrian School can't even process. They're all about the self and deny the collective economy largely even exists.

Keep in mind: every dime of income has to be spent by somebody else at the very same instant. We ARE all in this together, whether Mises and Hayek wanted to write about it or not, and whether Dan sees it or not.

There is an Austrian School archetype in the Warner Brothers stable of characters. I think of him every time I read nonsense from Mises or Hayek. His name is Yosemite Sam. He knew only three ways to obtain income - steal it, find it laying around, or dig it out of the ground. Presto, Austrian School economics.

But work cooperatively with anyone else, human or rabbit? Never occurred to him. In order for Sam to win, everyone else had to lose. This is Austrian School.

[/drops the mic]

 

To the bolded, I obtain income by producing value for clients in a free exchange. I don't tax them (except when the State tells me to), I don't rob them, nor force them to associate with me in any coercive manner whatsoever. I don't understand how you've drawn that conclusion of me? I'm certainly not a thief.

I don't deny a collective "We" economy exists, heck I participate in it but I don't confuse the abstract concept of "We" with the reality of "Me". "We" is nothing more than a description of more than one "Me" but only "Me"(s) actually exist.

The problem with using "We" as a single entity in economics, is it affords a "believer" the opportunity to (inadvertently?) insert their personal biases en masse, ("We owe it to ourselves"). If they have the power of government behind them, it affords them the opportunity to engage in "Market Shenanigans" and coercively (big difference between cooperatively and coercively. Whole reason for the IRS.) force those beliefs onto others.

No two individuals are exactly alike and as such, unless individual "Me"(s) choose to freely associate into a "We" market, it doesn't work long term. You can bet while it pays good though, the "experts" will keep trying. (lol)

 

Regardless, Austrian School, pinned as it is to a restricted money supply, can only grow economically (increase the size of the pie) if more garbage yellow metal is dug out of the ground. Because it has a debt avoidance fetish, lending necessarily requires loss of access to funds of the ultimate lender, like the bank run scene in It's a Wonderful Life. Only marginal reserve banking allows a truly growing economy. Not create, allow. It's like a rope on the trap door to the attic. You can close it by pulling on the rope, but you can't open it by pushing on the rope. Only Congress can push the door itself, and they refuse. Austrian School has only two outcomes - the obscene enrichment of the already rich, and chronically low growth. One major political party fell in love with Austrian economics a few decades ago and they control Congress now. Guess what - what we could expect to happen has. Enrich the rich, and crummy growth. There hasn't been a Keynesian political economics budget in this country for decades now. Not even this executive could do it. The last to do it properly was LBJ or arguably, Nixon and Ford.

 

I'm not an expert nor a student of Austrian economic theory. I like many of their ideas but doubt I've been exposed to/or taken the time to understand all of them fully. That said and IMO, we're already experiencing obscene enrichment of the top at the expense of the middle among other social ills.

Pretty sure we aren't operating under the Austrian theory. The current system came into being with the Bretton Woods Agreement which included a primary designer by the name of John Maynard Keynes. As such and however it evolved (devolved) IMO, his economic theory is disproven by current conditions.

 

If we're on a gold money standard but without FRL (100% reserve requirement), wouldn't the value of money increase (if the volume didn't) in relation to other goods? I don't see how that would hinder or stop growth of good ideas though it might reign in excessive speculation; Especially if the loses weren't backed with public bails.

No expert but it seems to me it would merely result in "good" price deflation. And of course as the value of gold increased, so too would the incentive to mine gold which should create a natural market balance?

I wouldn't be against speculation with monies divorced from my wallet either or any other ideas that decentralize the control of money. Win big, good for you - lose big, bad for me has to stop.

 

They do this by kicking the can down the road, increasing the debt and deficit, and burdening every taxpayer with additional load. "The system" may support this, but the burden of the people supporting the system increases.

Hoarding isn't necessarily a bad thing - in spite of what Reality TV is trying to preach.

Hoarding assets is how one GAINS wealth, economic freedom and ultimately the power to define their own destiny.

After all, isn't a collector nothing more than a hoarder?

If we had a hard money economy, we'd have initial pain for those that don't know how to prepare and take precautions (and for those that believe their meal ticket exists in the form of a vote). In the long run, we'd have a more aware, educated and prosperous population.

Hard money allows Darwinism to work effectively.

 

Are you, personally, ready to watch kids as they starve because their parents made a losing bet, or because their employers did? Or does this version of Darwinism include drawing a cloak around those who are "selected out" so you don't need to think about what that actually entails?

 

Isn't it my choice? I can choose to help them, or choose not to? (Maybe they're a family of criminals, crooks, thieves that I'd just assume see disappear?)

Even better, those that never learned - but want to can LEARN and get assistance along the way from people that actually do care. Make them stronger and more self-sufficient, and able to better take care of themselves next time. Part of the support comes with the requirement to learn the lessons and work for it.

Does someone else do your work for you?

Yes, I believe in Darwinism. And without going on a political rant - we are the only species that seems to get farther from it - while systematically increasing the burden those most able to survive and allowing those that won't to get ahead.

We see famine and ignorance every day, and feeding without teaching to fish will only make the problem grow. And for those that can't? We have charity. For those that can - but won't while expecting others to fix it? Yes, I can look them in the eye as they starve.

The movie "Idiocracy" is not a comedy - but has become more of a documentary on modern culture. It's scary to see it proliferate as rapidly as it does.

 

No. History has shown that fiat helps increase productivity by allowing the efficient transfer of wealth between entities. If we had a purely gold backed currency, which was somehow never destroyed nor created, the relative value of G&S would stagnate. Since any increase in productivity would result in a complementary decrease in price per unit sold, you'd create a purely economic driven monetary model. Individuals would be given incentive to actually decrease productivity. After all, they'd get paid the same amount in currency regardless of the amount they produced, since all goods would be treated as commodities.

Personally, I understand the rationale behind government consumption of overstock, but that *should* be used as a short-run stabilizing control, not as a long-run consumption model. If the government always consumes the excess production, you create incentives to improve productivity of the specific good, as opposed to transitioning to more affordable alternatives. Overall technology becomes bottlenecked, as money is directed to the most profitable sectors, whether due to artificial/induced or natural demand functions.