Basic question for Keynesian economists on inequality
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27-02-2014, 09:50 AM
RE: Basic question for Keynesian economists on inequality
(26-02-2014 10:40 PM)PoolBoyG Wrote:  Walmart pays in Walmart Dollars
McDonalds pays in McBucks
Bank branches pay in their own currency
..and so on.

Currency that you can only use at their own institutions. This is the EXACT OPPOSITE of freedom. This is slavery. You're forced a currency that you're forced to use in certain stores and banks, with all the strings attached.

Ah, you must be one of the guys in the video below. Thoroughly indoctrinated by your leaders that without their loving direction your life would be lost. You're convinced that if the US did not haul people away at gunpoint for using alternate currencies pandemonium would set in, as every company made its own currency. Thus, the people who print the fiat currency and have amassed half the world's wealth as a result, have convinced you that it's for your own good and they're saving you from chaos.

If there's even the slightest crack in your brainwashing helmet I'll ask you to consider this.... Where I live in Switzerland and where I work in Hong Kong, they do not have legal tender laws. You can open a bank account in any currency you want. ATM's can dispense in any currency. Retail stores are totally free to accept any currency as well. Contracts can be written in any currency. Gosh, there must be sheer pandemonium, right? My local supermarket, Migros, will only let me buy food in Migrodollors, right?

Uh, no. If Migros did that, they'd go bankrupt as all customers switched to coop. See the free market has a way of preventing this naturally--and believe it or not, a policeman and his gun are NOT required. For a business to succeed they have to make it easy for customers. To the contrary, the fact that I can pay my grocery bill in whatever currency I want only makes things EASIER for me, as a shopper. The fact that the Swiss are not forced to use the Swiss Franc against their will means that the Swiss Central Bank has to fight vigorously to defend the currency lest we all start using Euros, or bitcoins.

Competition does NOT lead to chaos as you suggest. The people who teach you this are simply the people who are amassing massive wealthy by having monopolies. They're telling you their monopoly (such as the Federal Reserve's) are for your own good, and have succeeded in enlisting you as a foot soldier to defend their monopoly.

And you lap it up, just like...



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27-02-2014, 09:54 AM
RE: Basic question for Keynesian economists on inequality
Facepalm

That is all.

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27-02-2014, 10:28 AM
RE: Basic question for Keynesian economists on inequality
(27-02-2014 04:27 AM)Mathilda Wrote:  For me though the bigger issue is that the whole economic system is fundamentally unsustainable and will come crashing down regardless of which school of thought we use to try and control it. Due to the nature of exponential functions, it will be very difficult to truly appreciate how soon the crash is.

This is true only if it depends on ever expanding populations. The current model does. But there is no limit to wealth, because wealth is an abstract concept - even though we tend to measure it in terms of dollar equivalents.

If viewed in terms of gold per person, or something like that, then sure, there's a limit. But if it's viewed in terms of improving quality of material life, then there really is no limit....although we'd certainly hit a point where such improvements provide diminishing return.

But yes, debt causes instability, and so a system designed around debt, is an economic catastrophe in the waiting. At some point, the whole thing will come crashing down. In the US, even the most generous estimates, show something like $30 trillion in unfunded off book liabilities - in addition to the $17 trillion on book debt. That's $470,000 per household. More pessimistic estimate show unfunded liabilities at closer to $100 trillion...which if true, would come out to $1.2 million per household - and most of it is indexed for inflation, so it can't just be inflated away.

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27-02-2014, 11:13 AM (This post was last modified: 27-02-2014 11:17 AM by Mathilda.)
RE: Basic question for Keynesian economists on inequality
(27-02-2014 10:28 AM)toadaly Wrote:  This is true only if it depends on ever expanding populations. The current model does. But there is no limit to wealth, because wealth is an abstract concept - even though we tend to measure it in terms of dollar equivalents.

If viewed in terms of gold per person, or something like that, then sure, there's a limit. But if it's viewed in terms of improving quality of material life, then there really is no limit....although we'd certainly hit a point where such improvements provide diminishing return.

Wealth is more than an abstract concept because it ultimately is backed by some finite material resource, whether that is gold, energy, land, the ability to farm.

It is more than just a problem of the global population increasing exponentially, demand from the existing population is also increasing as more countries become more affluent. This makes prices rise for the affluent West who have grown used to living to a certain standard.

Not only is demand rising, but resources are exponentially decreasing. Oil is becoming more scarce and more energy is required in order to extract the same amount as before. Renewables have a lower energy returned on energy invested (EROEI or ERoEI) than what we are used to with oil. Rare-earth minerals and the ability to pollute are also being exponentially used up.

Our economy is based on fossil fuels and needs to grow exponentially (2% growth per annum is still exponential, it just takes a few more years before it has doubled in size than say 50% growth). Fossil fuels are developed over a geological time scale and we have a single shot chance to not only try to find something to just replace what we have to maintain our current living standards but to also find something better than cheap oil if the economy is to continue growing.

We all know what happens when the economy stops growing. Living standards fall.

Unfortunately the only viable alternatives that I have come across are fusion power and asteroid mining.

Sorry for any typos I accidentally lost my previous post and am getting tired.
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27-02-2014, 12:21 PM
RE: Basic question for Keynesian economists on inequality
(27-02-2014 10:28 AM)toadaly Wrote:  
(27-02-2014 04:27 AM)Mathilda Wrote:  For me though the bigger issue is that the whole economic system is fundamentally unsustainable and will come crashing down regardless of which school of thought we use to try and control it.

This is true only if it depends on ever expanding populations.

I agree with Mathilda the system is doomed, but I think it's a lot simpler than than that.

Say you earn $50,000/year, and you manage to charge up $200,000 on a credit card that has an initial promotional interest rate of 1% for the first year, and then goes up to 24% after that. So, this year, you're doing ok, and you can cover the $200/month or so minimum payment. But if you don't pay it off now, what about next year when the rate goes up to 24%, and you now have to pay $48,000/year just in interest. You're bankrupt, right? No brainer?

So how is the US's situation any different? Right now the US is able to borrow insane sums of money because the Fed is keeping interests at near 0%. But even the Fed admits this is only temporary and the system will collapse if the US's debts is indefinitely bought up with newly printed money. Therefore, when the Fed stops, the interest rate the US pays on debt will return to a more normal historical average, like 6%. And, when that happens, the interest on the debt will use up most of the US's tax revenue and the US will never be able to pay it back.

So there is no exit strategy. Collapse is inevitable. This near 0% interest rate the government pays on debt is a temporary 'teaser rate', and once it returns to normal, the country is bankrupt. And many countries around the world are in the same situation.
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27-02-2014, 12:37 PM
RE: Basic question for Keynesian economists on inequality
(27-02-2014 11:13 AM)Mathilda Wrote:  Wealth is more than an abstract concept because it ultimately is backed by some finite material resource, whether that is gold, energy, land, the ability to farm.

There was a time when the number of animals you owned represented your wealth. Then it was gold, now it's paper money. Wealth is whatever people value and how they choose to represent it. It need not be a measure of pounds of physical stuff. Intellectual property is also a form of wealth, and it has no specific physical manifestation at all.

Quote:It is more than just a problem of the global population increasing exponentially, demand from the existing population is also increasing as more countries become more affluent. This makes prices rise for the affluent West who have grown used to living to a certain standard.

....and yet, wealth continues to increase per person even in the West. The distribution is obviously not even, but overall wealth just keeps going up.

Quote:Not only is demand rising, but resources are exponentially decreasing.

Well, no they aren't. Everything we use up, remains on this planet. As we mine resources, etc., we move them from a state of higher entropy into a state of lower entropy via the expenditure of energy. As we use them, they go back into a state of higher entropy again. But they still exist, and reapplication of energy can move them back into a state of low entropy again. As long as technology continues to advance, the ability to make this transformation continues.

But also, what we value evolves. The amount of resources needed in my smartphone is substantially less than the quantity needed for an old rotary land line. Yet the smartphone represents a tremendous increase in wealth over that old rotary land line. What you do with the resources, is more important than their quantity in the determination of wealth.

I agree that the current model of pulling stuff out of the ground won't sustain, but that doesn't mean we all then die. We're amazingly clever on whole, and even without knowing what we'll come up with in the future to overcome, we can see glimpses of it. Renewable power is increasing, recycling is increasing, farming practices are becoming more sustainable, etc.

Quote:Renewables have a lower energy returned on energy invested (EROEI or ERoEI) than what we are used to with oil.

Maybe, but it's still positive, and it won't stay lower forever. In-the-lab-today next generation solar beats coal. Assuming the trend continues, it will beat natural gas too within about 10 years. Of course, solar has storage and delivery issues, but there isn't any reason to think those are unsolvable.

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27-02-2014, 01:01 PM
RE: Basic question for Keynesian economists on inequality
(27-02-2014 11:13 AM)Mathilda Wrote:  Not only is demand rising, but resources are exponentially decreasing. Oil is becoming more scarce and more energy is required in order to extract the same amount as before.


Milton Friedman lecture:

I want to start this talk on energy by reading to you a quotation of something that was written some time ago by an eminent expert on energy, and here it goes:


Day by day it becomes more evident that the oil we happily possess in excellent
quality and abundance is the mainspring of modern material civilization … Oil in
truth stands not beside but entirely above all other commodities. It is the material
source of the energy of the country, the universal aid, the factor in everything we
do … It can be no matter of surprise that year by year we make larger draughts
upon a material of such myriad qualities––of such miraculous powers …
The question concerning the duration of our present cheap supplies of oil cannot
but excite deep interest and anxiety wherever or whenever it is mentioned: for a
little reflection will show that oil is almost the sole necessary basis of our material
power …

The constant tendency of discovery is to render oil a more and more efficient
agent, while there is no probability that when our oil is used up any more
powerful substitute will be forthcoming … We cannot make up for a future want
of oil by importation from other countries … Considering how greatly our
manufactures and navigation depend upon oil and how vast is our consumption of
it compared with that of other nations, it cannot be supposed that we shall do
without oil more than a fraction of what we do with it …
It is then simply inferred that we cannot long continue our present rate of
progress …

All things considered, it is not reasonable to suppose or expect that the power of
oil will ever be superseded by anything better. It is the naturally best source of
power, as air and water and gold and iron are, each for its own purposes, the most
useful of substances, and such as will never be superseded … I draw the
conclusion … that we cannot long maintain our present rate of increase of
consumption, … that the cost of fuel must rise … to a rate injurious to our
commercial and manufacturing supremacy; and the conclusion is inevitable that
our present happy progressive condition is a thing of limited duration …
The alternatives before us are simple … We have to make the momentous choice
between brief but true greatness and longer continued mediocrity.


Now if I were to ask you questions about who wrote that and when, I suspect most of you would say, “Well, that must have been written about five or six years ago by a very, very prescient man, a man who really saw the future very well.” Well, truth to tell, those words, with one exception where I have taken liberty with it that I’ll come back to, were written in a book first published in 1865. The one exception is that everywhere I read the word “oil” the original had the word “coal,” and it dealt with Great Britain and not with the United States. The excerpts I have read to you are from a book called The Coal Question written by a great English economist, W. Stanley Jevons, and published in 1865. He at that time in writing about the coal question said exactly the same thing, as you can see, that our supposed experts have been saying about the oil question in these recent years.

...

What conclusion do we draw from that? Jevons was a very eminent and able man; he was no charlatan. He was one of the great economists of the nineteenth century but he was dead wrong. Should we draw the conclusion that therefore no problem will arise? Not at all.

The fact is that we cannot get out of the problem by being able to predict things that are not predictable. The right conclusion is that the crystal ball is inevitably cloudy, that that is the nature of the world we live in, that all specific predictions about the precise amount of this, that or the other deserve skepticism, that what we need is not the kind of specific detailed blueprint for the future that Hoffman and Nehring would like to produce but what we need is an adjustment mechanism that will enable us to adapt to what happens as it develops. And of course, as everybody in this room knows, there is such a system, namely the price mechanism, which successfully steered us over several centuries from wood to coal to whale oil to petroleum
to natural gas. That is a mechanism in which it is in the self-interest of hundreds and thousands and millions of people to make their best guesses about the future, in which it’s unnecessary to have a single blueprint, in which you have an automatic adjustable mechanism as things develop.

If we have a problem today in the energy area, as we do, it is solely in my opinion because that system has not been allowed to work. The price mechanism has not been allowed to work by the U.S. at home; it has not been allowed to work by the OPEC cartel abroad which has created a monopoly and has raised drastically the price and reduced the availability of oil.
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27-02-2014, 01:44 PM
RE: Basic question for Keynesian economists on inequality
(27-02-2014 12:37 PM)toadaly Wrote:  There was a time when the number of animals you owned represented your wealth. Then it was gold, now it's paper money. Wealth is whatever people value and how they choose to represent it. It need not be a measure of pounds of physical stuff. Intellectual property is also a form of wealth, and it has no specific physical manifestation at all.

True but it is all backed by something, whether it is a resource or the amount of energy that went into producing it. Technology and intellectual property has value because of the work required to produce it, which in this economy requires oil. Even bitcoins are backed by the computational power required to mine them, which ultimately comes from energy and resources.

German hyper-inflation was stopped once the currency started to be backed by land.

I'll need to find the video but I remember one describing how the only country in the world that has ever paid off its accumulating debt was Britain because of the industrial revolution which was initiated by harnessing the power of coal using steam engines. It then went off and conquered most of the world.

More money does not equal more wealth. In the same way that more data is not the same as more information.


(27-02-2014 12:37 PM)toadaly Wrote:  ....and yet, wealth continues to increase per person even in the West. The distribution is obviously not even, but overall wealth just keeps going up.

Does it? Or is the money supply just increasing? The British government are using quantitative easing to fight deflation but living standards are falling.



(27-02-2014 12:37 PM)toadaly Wrote:  
Quote:Not only is demand rising, but resources are exponentially decreasing.

Well, no they aren't. Everything we use up, remains on this planet. As we mine resources, etc., we move them from a state of higher entropy into a state of lower entropy via the expenditure of energy. As we use them, they go back into a state of higher entropy again. But they still exist, and reapplication of energy can move them back into a state of low entropy again. As long as technology continues to advance, the ability to make this transformation continues.

It takes more energy to recycle than it does to mine, so this increases demand on energy supplies. Everything is interconnected. Take wind power for example, turbines require a lot of rare earth minerals. If we have to recycle these minerals then the EROREI of renewables decrease. This means we need more wind turbines which requires more rare earth minerals etc.

It is true that the atoms are still here in the planet but it reaches a point where there is no practical way to recycle. For example, silver is used in many industrial processes where it can never be recovered. Or platinum used in catalytic converters ending up in road sweepings.

(27-02-2014 12:37 PM)toadaly Wrote:  But also, what we value evolves. The amount of resources needed in my smartphone is substantially less than the quantity needed for an old rotary land line. Yet the smartphone represents a tremendous increase in wealth over that old rotary land line. What you do with the resources, is more important than their quantity in the determination of wealth.

Smart phones are particularly unsustainable due to all the rare earth minerals that they require. Many smart phones get thrown away. Breaking them apart and recycling the materials isn't easy. The price of a smartphone in a shop is not representative of its true cost.


(27-02-2014 12:37 PM)toadaly Wrote:  I agree that the current model of pulling stuff out of the ground won't sustain, but that doesn't mean we all then die. We're amazingly clever on whole, and even without knowing what we'll come up with in the future to overcome, we can see glimpses of it. Renewable power is increasing, recycling is increasing, farming practices are becoming more sustainable, etc.

I wasn't suggesting that we all die, although there could well be a partial die off. But we can be sure that the living standards of everyone in the west will decrease if we do not find a clean alternative to cheap oil. Time is limited and the severity of the situation all depends upon whether governments continue as normal for as long as possible or be honest about the cliff that we are facing. The current economic system isn't helping.

The sooner we start transitioning to a post peak oil world the easier it will be.


(27-02-2014 12:37 PM)toadaly Wrote:  
Quote:Renewables have a lower energy returned on energy invested (EROEI or ERoEI) than what we are used to with oil.

Maybe, but it's still positive, and it won't stay lower forever. In-the-lab-today next generation solar beats coal. Assuming the trend continues, it will beat natural gas too within about 10 years. Of course, solar has storage and delivery issues, but there isn't any reason to think those are unsolvable.


There isn't actually that much hope that renewables will be able to match the cheap oil boom that we have all lived with and grown accustomed to. This still doesn't counteract the fact that demand is rising for various reasons. I believe that we should be putting more research into renewables though because they are better than nothing and it buys us more time to make the transition to a post peak-oil world.

Remember, oil is basically fossilised energy from the sun. The Earth produces about 26 barrels a day apparently. In 2011 a new global record was set for oil extraction of 86.3m barrels a day. We are trying to replace it with the energy from the sun (wind, solar) hitting the planet now. There's also gravitational energy to harness with tidal power. The efficiency of recycled rare earth minerals for use in renewables is poorer then the freshly mined stuff though.

Nuclear energy requires an upfront energy cost to mine the fuel. Thorium reactors will also buy us time though if we start using them.

Everything you mention, and more, is covered in detail in that book I posted earlier. I read through that book trying to find the same counter arguments as you so if you can manage it then honestly, it would be very welcome to hear. The book gives a lot of hard figures.

I used to run a discussion forum for three years that discussed these issues in depth and try as we might it was difficult finding much to hope for. For me the only real game changers are fusion (which some Physicists are sceptical about achieving) and asteroid mining.
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27-02-2014, 04:56 PM
RE: Basic question for Keynesian economists on inequality
(27-02-2014 01:44 PM)Mathilda Wrote:  True but it is all backed by something, whether it is a resource or the amount of energy that went into producing it. Technology and intellectual property has value because of the work required to produce it, which in this economy requires oil.

Well sure. There is limited oil. But there is essentially unlimited energy available. Even with renewables, the earth would eventually reach a point of maximum capacity, where there just isn't anywhere else to put solar farms and windmills, or whatever. But power will continue to come from them until the sun starts to fail - it just won't increase beyond that point.

But energy usage does not have to continue to grow for wealth to grow, because new innovations don't require more and more energy in general. They build on previous innovations, which is why technology expands exponentially. Much of the energy put in, is retained in the next generation. So even in some distant future where all energy is renewable, and we've reached maximum realizable capacity, wealth can still grow.

Quote:
(27-02-2014 12:37 PM)toadaly Wrote:  ....and yet, wealth continues to increase per person even in the West. The distribution is obviously not even, but overall wealth just keeps going up.

Does it? Or is the money supply just increasing? The British government are using quantitative easing to fight deflation but living standards are falling.

If you believe GDP numbers, yes. GDP already factors in inflation. I don't really want to get into whether reported inflation reflects real inflation or not, so I'll concede that perhaps wealth has stopped growing.

Quote:It takes more energy to recycle than it does to mine, so this increases demand on energy supplies. Everything is interconnected. Take wind power for example, turbines require a lot of rare earth minerals. If we have to recycle these minerals then the EROREI of renewables decrease. This means we need more wind turbines which requires more rare earth minerals etc.

True, but once the easy solutions are exhausted, we move on to the harder solutions. The rate of wealth growth may slow, but it need not reverse or stop (even if it presently has).

Quote:It is true that the atoms are still here in the planet but it reaches a point where there is no practical way to recycle. For example, silver is used in many industrial processes where it can never be recovered. Or platinum used in catalytic converters ending up in road sweepings.

Solid points. If we run out of silver or platinum and it's all in such a scattered small form that there is no practical way to recover it, and there are simply no alternatives, then we're screwed.

I just don't see that ever happening. The platinum group metals are already valuable enough to spur a search for alternatives, and we are far from exhausting the accessible supplies.

I think I have a fundamental faith in human ingenuity - maybe a bit of arrogance since I'm an engineer myself and see this day in and day out first hand. I could be wrong of course, but I'm using history as a guide, and I'm admittedly one of those naive bright eyed singularity types. Not everyone buys the argument, and I understand that. I'm just convinced history will prove it correct. Big Grin

Quote:I wasn't suggesting that we all die, although there could well be a partial die off. But we can be sure that the living standards of everyone in the west will decrease if we do not find a clean alternative to cheap oil. Time is limited and the severity of the situation all depends upon whether governments continue as normal for as long as possible or be honest about the cliff that we are facing. The current economic system isn't helping.

The possibility of bad things happening in the near term due to peak oil (or peak resource in general), is real. I'm arguing over a longer time frame than that. The near term could be just awful.

That said, if oil rises to $300/gallon in current dollars, and gasoline jumps to $10/gallon or more in current dollars, the will in the West to start building nuclear plants will completely change, as will the economics of renewables, gas liquification, etc.

With breeder reactors, there is already enough waste sitting in storage to provide the world with energy at current usage rates, for 1000 years without any new mining operations. That's a heck of a lot of time to come up with alternatives. We surely will have exploited everything the laws of physics permit by then.

Quote:The sooner we start transitioning to a post peak oil world the easier it will be.

I completely agree.

Quote:Everything you mention, and more, is covered in detail in that book I posted earlier. I read through that book trying to find the same counter arguments as you so if you can manage it then honestly, it would be very welcome to hear. The book gives a lot of hard figures.

I might add it to my reading list that I'm always way behind on. I assume you're talking about "The Crash Course: The Unsustainable Future Of Our Economy, Energy, And Environment "?

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27-02-2014, 09:47 PM
RE: Basic question for Keynesian economists on inequality
CathyM,

A few points.

1. From the very beginning I figured out you were a Keynesian economist. You repeatedly denied this, even talking about studying of Friedman. Then in a recent post you said the "most important economist... is the brilliant Paul Samuelson". Who, by the way, is also known as the father of Keynesian economics, since Keynes himself died young and Samuelson was the one behind it. So, your comment proves that, while you may not like to admit it, yes, you are a Keynesian economist, and I had you nailed from the beginning.

2. As always, anytime some fact is uncomfortable, you simply ignore it and refuse to comment. The fact is that Samuelson and Friedman both analyzed the various economic systems and Samuelson predicted the Soviet Union had the best system and would become the world's dominant economy, Friedman predicted it would collapse and the strongest economies would be market-driven, not centrally planned. Samuelson was, in fact, so completely ignorant that even right up to the Soviet collapse when the whole world could see it was unequivocally a dismal failure, Samuelson STILL insisted it was the best system and the communist economy would take over the world. Today, the only country on the planet that actually still has the type of economy Samuelson advocated is North Korea. Even Cuba is now allowing private ownership of the means of production because Samuelson's centrally planned economy was SUCH a miserable failure. So, how's that working out for the people of North Korea? If Samuelson understood economics then certainly the one country that's following his preferred system must be doing pretty well, huh? Your response to all this was, predictably, to ignore it. Cover your ears, scream "I'm not listening", and still believe that Samuelson was the most brilliant economist.

3. Predictably you were unable to answer the question in this OP. You can see that it wasn't a ridiculous question like you said, since there has been intelligent debate. It's just that YOU could not answer it without either (a) betraying your beliefs, or (b) looking like an idiot. So, you chose to bury your head in the sand and ignore it.

This shows how Keynesian economics is a faith-based religion, not a science.
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